Apparel maker The Gap Inc. ( GPS ) on Tuesday was hit with a rare "Sell" call by analysts at at Collins Stewart.
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 Tuesday.
The Bottom Line
Shares of The Gap ( GPS ) 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. ( GPS ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.1 out of 5 stars.
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