Gap Up on Improved July Comps, Impressive Q2 EPS Forecast - Analyst Blog


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Shares of The Gap Inc. ( GPS ) gained 5.1% during yesterday's after-hours trading session following the company's better-than-expected sales results for the four-week period ended Aug 2, 2014. Investors were also encouraged by the company's impressive earnings forecast for the second quarter of fiscal 2014.

Gap's net sales in Jul 2014 witnessed a year-over-year increase of 5% and reached $1.17 billion compared with $1.12 billion in the year-ago comparable period. Comparable-store sales (comps) for the month improved 2% as against a rise of 1% registered in July last year.

The company's July comps mainly benefited from the strong performance at its Banana Republic and Old Navy brands which was partially offset by weak performance at its namesake brand. The company's Old Navy Global' s comps increased 3% versus a 5% decline in Jul 2013, while comps at Banana Republic Global rose 6%, against a 1% decrease in the year-ago period. However, comps at Gap Global were down 2% compared with an increase of 7% registered in the prior-year period.

Gap is not the only retailer which has registered a sharp rise in its sales performance last month. Other retailers such as Zumiez Inc. ( ZUMZ ), Costco Wholesale Corp. ( COST ) and L Brands, Inc. ( LB ) have also witnessed increases -- 3.5%, 5% and 6%, respectively, in July comps. The improved July results were mostly attributed to a rise in traffic probably due to the positive economic factors like an improved job scenario and consumer credit as well as heavy promotions.

Coming back to Gap, the company also provided its second-quarter fiscal 2014 sales performance. The company's net sales for the quarter improved 3% year over year to $3.98 billion compared with $3.87 billion in the year-ago comparable quarter. However, comps for the period remained flat versus a 5% rise registered in the prior-year period, as the strong performance at Old Navy was fully offset by weak sales at the namesake brand.

Brand-wise, comps at Gap Global were down 5% compared with a 6% increase in the prior-year period, while comps at Banana Republic Global remained flat against a decline of 1% registered in corresponding quarter of previous fiscal. However, Old Navy Global 's comps rose 4% versus a 6% increase last year.

Apart from reporting sales performance for July and the second quarter, the company revealed that, it is expecting earnings for the second quarter to come in the range of 73 cents to 74 cents per share. The company also disclosed that the expected earnings include a gain of approximately 5 cents from the sale of real estate assets.

Excluding the above-mentioned one-time gain, Gap expects adjusted earnings to come in between 68 cents and 69 cents per share. Currently, the Zacks Consensus Estimate for the quarter is pegged at 66 cents per share.

Gap, which currently carries a Zacks Rank #3 (Hold) will report its second-quarter results on Aug 21, 2014.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: GPS , LB , ZUMZ , COST

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