Gap Faces Holiday Uncertainty Heading Into Q4, Says Analyst – GAP (NYSE:GPS)

  • Telsey Advisory Group Analyst Dana Telsey reiterated with a Market Perform rating on shares of gap inc GPS and raised the price target to $15 from $10.
  • Gap reported adjusted EPS of $0.71 in the third quarter of FY ’22 compared to $0.27 last year, above consensus estimates for breakeven.
  • The analyst said the earnings boost was driven by better-than-expected increases in sales, gross margin and operating expenses.
  • Sales grew across all channels, with online up 5% in the quarter and store sales up 1% Y/Y.
  • The timing of franchise sales and an uptick in demand from the holiday sales event in October also benefited for the quarter, he said.
  • Merchandise margin in the third quarter was negatively impacted by an increase in higher discounts and inflated commodity prices, partially offset by lower higher air freight costs last year.
  • By brand, it lagged for the quarter with a 1% comp decline (versus a 9% decrease a year ago), but improved meaningfully from a 15% decline last quarter.
  • BR led the way with 10% comp growth for the quarter (versus 28% growth a year ago), which was better than 9% growth in the prior quarter.
  • The company noted that Q4 sales could be down by the mid-single digits, well below the current consensus estimate of roughly flat.
  • The Gap brand faces a nearly 100-bp headwind as it celebrates the anniversary of Yeezy Gap’s sale one year ago.
  • The management is also taking a cautious approach to the holiday given the uncertain macro backdrop and competitive promotional environment.
  • The results mean that each brand has shown a gradual improvement in an encouraging sign that organizational change may be on the way after disappointing results over the past year.
  • In addition, the company is aggressively managing costs while right-sizing its inventory position, Telse cited.
  • The Q4 sales outlook came in below prior expectations as the company carefully plans through a potentially challenging and promotional holiday season.
  • Price Action: GPS shares are trading up 4.68% at $13.305 last check Friday.

Leave a Comment

Your email address will not be published.

Then We Knew It Was on..” – Roman Reigns Shark Tank Keto Gummies Scam Alert? McDonald’s Halloween Buckets Could Be Back How to Watch Spacecraft Collide With Deep Space Asteroid Grand Theft Auto VI footage leaked after the hack Floyd Mayweather Jr boxer knocks out Mikuru Asakura martial artist