Gap (GPS) Shares Rally Despite Lower September Comps

Shares of Gap Inc (GPS) were trading up $1.52, nearly 7%, to $24.30 per share in Friday’s premarket after the company announced its September comparable store sales had declined.

Here's what you need to know.

Sales declines are accelerating

The Gap is the world’s second largest retailer of clothing and accessories.
Founded in 1969, the company operates under five different divisions: The Gap, Banana Republic, Piperlime and Old Navy.

The company operates more than 3,000 stores worldwide with over 2,500 of them located in the United States and employs about 130,000 people. In addition, the company operates a number of e-commerce sites where they market their products.

For the five week period ended on October 1, Gap reported that its net sales had declined 2% to $1.43 billion compared to $1.46 billion in the same period one year ago. The company reported comparable store sales had declined 3% compared to a 1% decrease in September last year.

It seems like the sales drops are building momentum.
Gap (GPS) Shares Rally Despite Lower September Comps
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Still, the weak performance may be one-off.

According to the company, a fire which occurred at one of its buildings in its Fishkill, New York distribution center campus impacted Gap's comparable store sales in September by about three percentage points. Gap also noted that its September margin rates had actualized significantly higher than previously estimated and were more than offset by the estimated earnings impact from sales lost and added logistical expenses as a result of the Fishkill fire.

Comparable sales in September by the company’s global brands had Gap Global showing the largest decline, negative 10%, compared to a flat reading last year. Banana Republic Global followed with a negative 9% versus negative 10% last year.

Old Navy Global was the company’s only global brand showing a positive number at 4% compared to another positive 4% gain last year. Gap stated that the Fishkill fire will impact October sales by approximately 3% and have a negative impact on it fourth quarter sales results.

Gap Inc. stock had an initial negative reaction to the news, but shares rallied in this morning’s premarket as investors decided the numbers were not as bad as originally interpreted. Gap shares are trading in the middle of their yearly range and have been upgraded by several analysts recently.

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Published on Oct 7, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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