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Gap (GPS) to Report Q3 Earnings: Disappointment in Store?

The Gap Inc.GPS is slated to report third-quarter 2015 results on Nov 19. In the last quarter, the company posted in-line earnings. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

Gap recently witnessed another disappointing month as well as quarter from the sales perspective. The dismal performance by this apparel retailing giant can be attributed to double-digit decline in comparable-store sales (comps) of its Banana Republic brand and Gap Global, coupled with negative foreign currency impact. However, the company's Old Navy brand sustained its comps growth trend.

In the third quarter, the company registered comps decline of 2%. Net sales totaled $3.86 billion, down 3% from the prior-year quarter, including foreign currency translation impact from the weakening of the Japanese yen and Canadian dollar against the U.S. dollar.

The company projects earnings per share in the range of 62-63 cents for the third quarter. This excludes about 2.5 cents of negative impact from foreign currency movement. Moreover, the company now expects its inventory dollar per store at the end of the third quarter to fall marginally short of its previously provided guidance.

Though the company is working to revive the performance of its namesake brand, we are cautious about the to-be-reported quarter owing to the dismal sales trend, rising raw material prices and adverse foreign currency translation.

Earnings Whispers

Our proven model does not conclusively show that Gap is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Gap currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 63 cents.

Zacks Rank: Gap holds a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Abercrombie & Fitch Co. ANF has an Earnings ESP of +15.79% and a Zacks Rank #3 (Hold).

Chico's FAS Inc. CHS has an Earnings ESP of +5.00% and a Zacks Rank #3.

Spectrum Brands Holdings Inc. SPB has an Earnings ESP of +2.59% and a Zacks Rank #3.

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ABERCROMBIE (ANF): Free Stock Analysis Report

GAP INC (GPS): Free Stock Analysis Report

CHICOS FAS INC (CHS): Free Stock Analysis Report

SPECTRUM BRANDS (SPB): Free Stock Analysis Report

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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.


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

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