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Here's Why Gap (GPS) Stock Appears a Promising Pick Now
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The Gap, Inc. (GPS - Free Report) stock is well poised to tap the positive trends in the fashion world, thanks to its robust strategic initiatives, including the Power Plan 2023 Strategy. The company is gaining from brand strength and solid demand for its products that resonate well with customers.
Management is committed to creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Buoyed by such strengths, shares of this clothing and accessories retailer have surged 52.9% compared with the industry’s 32.6% growth in the past three months. The Zacks Consensus Estimate for GPS’ fiscal 2023 earnings per share is pegged at $1.15, suggesting an increase of 387.5% year over year. This highlights analysts’ confidence in the stock.
Delving Deeper
Gap’s Power Plan 2023 Strategy focuses on opening highly profitable Old Navy and Athleta stores while closing the underperforming Gap and Banana Republic stores. It expects to leverage its powerful platform to deliver competitive omni capabilities to meet customers’ needs, fueled by its scaled operations. Through the plan, the company expects to deliver consistent sales growth, margin expansion and strong operating cash flow.
The company expects to open 15-20 Old Navy and Athleta stores and close 50 Gap and Banana Republic stores in the fiscal 2023. This is in sync with its plan to close 350 Gap and Banana Republic stores in North America by the end of the fiscal 2023. With the closing of the underperforming Gap and Banana Republic stores, the company expects to realize $100 million in EBITDA savings on an annualized basis by the end of the current fiscal year. As part of the plan, the company expects the Old Navy and Athleta brands to contribute about 70% to sales by the fiscal 2023.
Image Source: Zacks Investment Research
Gap is aggressively undertaking cost-management actions. It has been simplifying and optimizing its operating model and structure, including increasing spans of control and decreasing management layers to improve the quality and speed of decision-making. It is also creating a consistent organizational structure across its brands. The company is focused on actioning more than $550 million in annualized cost savings and realizing margin expansion on lower air costs, improved discounting and effective sourcing strategies.
Gap is gaining from lower airfreight and improved promotional activity. This has been aiding the company’s margins and, in turn, the overall profitability. During third-quarter fiscal 2023, the gross margin expanded 390 basis points (bps) year over year on a reported basis and 260 bps on an adjusted basis. Merchandise margin increased 340 bps on 180 bps of leveraged commodity costs and lower air utilization and160 bps of improved promotional activity from better inventory position and robust assortments.
Given all the positives, Gap stock seems to deserve a place in your investment portfolio. A Value Score of A further adds strength to this current Zacks Rank #1 (Strong Buy) company.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 13.3% from the year-ago reported figure. ANF delivered an earnings surprise of 713% in the last reported quarter.
Hibbett, the key sporting goods retailer, currently sports a Zacks Rank of 1. HIBB delivered an earnings surprise of 24.2% in the trailing four quarters.
The Zacks Consensus Estimate for Hibbett’s current financial-year sales suggests growth of 1.7% from the year-ago reported figure.
American Eagle, a leading apparel retailer, currently carries a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23% in the trailing four quarters.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales suggests growth of 4.6% from the year-ago reported figure.
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Here's Why Gap (GPS) Stock Appears a Promising Pick Now
The Gap, Inc. (GPS - Free Report) stock is well poised to tap the positive trends in the fashion world, thanks to its robust strategic initiatives, including the Power Plan 2023 Strategy. The company is gaining from brand strength and solid demand for its products that resonate well with customers.
Management is committed to creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Buoyed by such strengths, shares of this clothing and accessories retailer have surged 52.9% compared with the industry’s 32.6% growth in the past three months. The Zacks Consensus Estimate for GPS’ fiscal 2023 earnings per share is pegged at $1.15, suggesting an increase of 387.5% year over year. This highlights analysts’ confidence in the stock.
Delving Deeper
Gap’s Power Plan 2023 Strategy focuses on opening highly profitable Old Navy and Athleta stores while closing the underperforming Gap and Banana Republic stores. It expects to leverage its powerful platform to deliver competitive omni capabilities to meet customers’ needs, fueled by its scaled operations. Through the plan, the company expects to deliver consistent sales growth, margin expansion and strong operating cash flow.
The company expects to open 15-20 Old Navy and Athleta stores and close 50 Gap and Banana Republic stores in the fiscal 2023. This is in sync with its plan to close 350 Gap and Banana Republic stores in North America by the end of the fiscal 2023. With the closing of the underperforming Gap and Banana Republic stores, the company expects to realize $100 million in EBITDA savings on an annualized basis by the end of the current fiscal year. As part of the plan, the company expects the Old Navy and Athleta brands to contribute about 70% to sales by the fiscal 2023.
Image Source: Zacks Investment Research
Gap is aggressively undertaking cost-management actions. It has been simplifying and optimizing its operating model and structure, including increasing spans of control and decreasing management layers to improve the quality and speed of decision-making. It is also creating a consistent organizational structure across its brands. The company is focused on actioning more than $550 million in annualized cost savings and realizing margin expansion on lower air costs, improved discounting and effective sourcing strategies.
Gap is gaining from lower airfreight and improved promotional activity. This has been aiding the company’s margins and, in turn, the overall profitability. During third-quarter fiscal 2023, the gross margin expanded 390 basis points (bps) year over year on a reported basis and 260 bps on an adjusted basis. Merchandise margin increased 340 bps on 180 bps of leveraged commodity costs and lower air utilization and160 bps of improved promotional activity from better inventory position and robust assortments.
Given all the positives, Gap stock seems to deserve a place in your investment portfolio. A Value Score of A further adds strength to this current Zacks Rank #1 (Strong Buy) company.
Pick These Solid Picks
We have highlighted three other top-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Hibbett (HIBB - Free Report) and American Eagle (AEO - Free Report) .
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 13.3% from the year-ago reported figure. ANF delivered an earnings surprise of 713% in the last reported quarter.
Hibbett, the key sporting goods retailer, currently sports a Zacks Rank of 1. HIBB delivered an earnings surprise of 24.2% in the trailing four quarters.
The Zacks Consensus Estimate for Hibbett’s current financial-year sales suggests growth of 1.7% from the year-ago reported figure.
American Eagle, a leading apparel retailer, currently carries a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23% in the trailing four quarters.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales suggests growth of 4.6% from the year-ago reported figure.