On Sep 18, 2013, we reiterated our long-term Neutral
recommendation on global apparel retailer,
The Gap, Inc.
), with a target price of $44.00.
Gap is a leading player in the highly fragmented specialty retail
sector, offering a diverse range of clothing, accessories and
personal care products for men, women, children and infants. We
believe that its flagship brands - including Gap, Banana
Republic, Old Navy, Piperlime and Athleta - complement one
another, thereby strengthening the company's position among
apparel retailers. This is evident from the recently
concluded second quarter 2013, in which Gap posted
impressive top and bottom-line performances, which easily
surpassed the Zacks Consensus Estimate.
Further, Gap has a track record of disciplined capital management
while maintaining a strong balance sheet. The company also
generates strong free cash flow, which allows it to repurchases
shares and also boost shareholder value by consistently
increasing its dividend.
Recently, the company raised its dividend by 33.3% to 20 cents
per share. Notably, Gap has raised its dividend tenfold from 2
cents per share in 2004 to the present amount of 20 cents.
Moreover, Gap has returned over $14 billion to its shareholders
through share repurchases and dividend payouts during the same
CITI TRENDS INC (CTRN): Free Stock Analysis
GAP INC (GPS): Free Stock Analysis Report
KIRKLANDS INC (KIRK): Free Stock Analysis
PC MALL INC (PCMI): Free Stock Analysis
To read this article on Zacks.com click here.
Gap considerably improved in its comparable sales and total sales
performance, driven by consistent endeavors to remain buoyed on
the growth trajectory. The company's turnaround strategies that
included a shift from conventional advertising strategies (print,
outdoor) to a more versatile and interactive campaign with
emphasis on digital formats have paid off well as is evident from
its comparable store sales performances over the last one year.
During the period from Jan to Aug 2013, the company registered
year-over-year comparable store sales growth in each month,
except for March.
However, we remain slightly cautious about the stock's future
performance due to a possible rise in both input costs and
inventory levels. Moreover, while its global expansion plan
appears promising, the possibility of negative international
comps results remains a concern. Alongside, stiff competition and
persistent macroeconomic challenges continue to be short-term
deterrents for the stock.
Other Stocks to Consider
Gap carries a Zacks Rank #3 (Hold). Other stocks that are worth a
look in the retail sector include
Citi Trends, Inc.
). All of these carry a Zacks Rank #1 (Strong Buy).