Apparel maker The Gap Inc. (
) on Tuesday was hit with a rare "Sell" call by analysts at at
The firm also set a $17 price target on GPS, suggesting a small
downside to the stock's Monday closing price of $17.76.
A Collins analyst commented, "Gap continues to deal with fashion
issues, specifically within women's apparel, which has led to
consolidated SSS declines in all but two months in FY11. Management
has repeatedly commented that turning around the women's category
remains a top priority, but we have yet to see meaningful
improvement in fashion. We believe GPS will be hardpressed to
sustain a SSS recovery without a significant improvement in its
women's line. Gap North America's troubles appear deeply rooted, as
the segment has recorded SSS declines in 25 out of the last 27
quarters, and the brand still lacks a lead designer. At the same
time, the company is combatting significant product cost inflation,
namely cotton, which we estimate will pressure gross margin through
H1:12. We believe a Sell rating is warranted, given the ongoing
fashion issues and near-term margin pressure."
The Gap shares were mostly flat in premarket trading
The Bottom Line
Shares of The Gap (
) have a 2.53% dividend yield, based on last night's closing stock
price of $17.76. The stock has technical support in the $16 price
area. If the shares can firm up, we see overhead resistance around
the $19-$20 price levels.
The Gap Inc. (
) is not recommended at this time, holding a Dividend.com DARS™
Rating of 3.1 out of 5 stars.
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