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Gap November Comps Fall 1%, Banana Republic Looks Good

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Specialty retailer, Gap, Inc. (GPS - Free Report) posted soft comparable store sales (comps) for the four weeks ending Nov 26, 2016. Also, net sales of $1.53 billion fell 2.5% on a year-over-year basis over the same time frame.

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Though Gap’s comps for the four-week period dipped 1% compared with an 8% fall recorded last year, results largely gained from the positive customer response for its Banana Republic product assortments.

However, comps for November were hurt by the campus fire that broke out in its distribution center in Fishkill, NY in August. The fire affected the company’s November comps by 3 percentage points. Further, management stated that most of the unfavorable effect on the fourth-quarter fiscal 2016 comps due to the Fishkill distribution centre fire occurred in November.

Comps at Gap Global declined 3% compared with a 4% dip recorded last year. Further, performance at Old Navy recorded a 2% drop compared with a 9% decline last year. On the other hand, Banana Republic Global, which was persistently impacted by declining comps, recorded positive comps of 5% compared with a 19% fall witnessed last year.

Brand wise, the Fishkill fire hurt comps at each of the company’s brands. Comps for Gap Global included about 4 percentage points impact from the fire, while comps for Old Navy were hurt by nearly 1 percentage point. Further, Banana Republic’s comps, though positive, was hurt by an approximately 3-percentage-point impact from the fire.

Gap has undertaken several contingency steps with regard to the Fishkill fire to minimize the adverse effects from this calamity. These include the company’s act of rerouting deliveries and increasing the staff strength at other facilities. Evidently, Gap is using its North American distribution center channel and ship-from-store capacity to curtail the effect of the fallout.

Further, the company reported that November footfall remained challenging; however, the company was optimistic by the performance witnessed in the back half of the month. Also, the company remains on track with the execution of its holiday. This is evident from the holiday plans announced by its best-performing Old Navy brand and its namesake brand, which remains committed toward improving its performance.

In the past six months, Gap displayed a tremendous run in the index, as the stock surged 31.2% compared with the Zacks categorized Retail-Apparel/Shoe industry that increased 11.5%.

Apart from Gap, L Brands, Inc. , Costco Wholesale Corporation (COST - Free Report) and Zumiez Inc. (ZUMZ - Free Report) posted comps growth of 4%, 1% and 5.7%, respectively, for November.

Gap currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 



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