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Can Gap's (GPS) Strategies Help the Stock Sustain Momentum?
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The Gap, Inc. (GPS - Free Report) is back on investors’ radar, with its turnaround efforts in full swing. Shares of this Zacks Rank #3 (Hold) company have increased 12.7% over the last six months, outperforming the Zacks categorized Retail – Apparel/Shoes industry’s decline of 11.4%. The company has been gaining from strong ongoing growth efforts and transformation plan, which also drove its fourth-quarter fiscal 2016 results.
Let’s delve deeper into Gap’s strategies that have been helping it to brave the industry headwinds. Gap recently chalked out various strategic plans to keep track of the rapid changes in the apparel industry. The company intends to speed up its transformation plan through meaningful changes to its product portfolio and operating capabilities worldwide. In this regard, management plans to focus on growing Gap’s brands in regions which offer greater structural advantage and potential to expand market share, while closing underperforming stores.
Further, the company remains keen on streamlining its operating model by creating a more proficient global brand structure, which will enable its brands to utilize scale advantages more efficiently. Clearly, the company remains committed to positioning itself better for long-term growth by setting its priorities right and channelizing its resources accordingly.
Gap’s efforts toward global expansion are also noteworthy. Over the past few years, the company aggressively expanded its global footprint across emerging markets including China, Russia, South Africa and certain Latin American countries. Going forward, management intends to remain committed toward store growth, with primary focus on greater China, Athleta and global outlet stores.
We also commend Gap’s focus on enhancing its e-commerce and omni-channel capabilities in response to the brick-and-mortar retailing concept losing luster on account of customers’ shift toward online shopping. As part of its omni-channel endeavors, Gap has been continuously extending its “find-in-store”, “Reserve-in-Store” and “Order in Store” facilities across various stores. Also, the company recently came up with an app – DressingRoom – which will enable customers to try clothes through reality experiences generated via smart phones. We believe that these initiatives should boost Gap’s top line in the long run.
All these factors also helped the company to post decent fourth-quarter 2016 results, wherein earnings continued with its in-line performance and sales marked its third straight beat. Also, fuelled by positive comps, the top line rose year over year for the first time in the last eight quarters. This was largely backed by a successful holiday season that benefitted from continued strength at Old Navy.
However, results continued to be hurt by foreign currency headwinds, costs associated with planned store closures, and persistent weakness across Banana Republic. Further, management expects currency woes to hurt fiscal 2017 results, as is clear from its soft outlook, which led to downward estimate revisions. Moreover, stiff competition from other major players remains a threat, as it can weigh upon Gap’s market share and overall operating performance.
Nonetheless, Gap’s constant shareholder-friendly moves, the aforementioned growth initiatives and its impressive stock movement should be enough to draw investors’ attention.
Stocks to Consider
Some better-ranked stocks in the same industry include The Children's Place, Inc. (PLCE - Free Report) , Kate Spade & Company and Foot Locker, Inc. (FL - Free Report) . While Children's Place and Kate Spade sport a Zacks Rank #1 (Strong Buy) each, Foot Locker currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Children's Place has an average positive earnings surprise of 39% in the trailing four quarters. The stock has a long-term growth rate of 8%.
Kate Spade, with long-term earnings per share growth rate of 28.3%, has delivered positive earnings surprise in the last two quarters.
Foot Locker has delivered positive earnings surprise in the last three quarters. The stock has a long-term growth rate of 9.7%.
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Can Gap's (GPS) Strategies Help the Stock Sustain Momentum?
The Gap, Inc. (GPS - Free Report) is back on investors’ radar, with its turnaround efforts in full swing. Shares of this Zacks Rank #3 (Hold) company have increased 12.7% over the last six months, outperforming the Zacks categorized Retail – Apparel/Shoes industry’s decline of 11.4%. The company has been gaining from strong ongoing growth efforts and transformation plan, which also drove its fourth-quarter fiscal 2016 results.
Let’s delve deeper into Gap’s strategies that have been helping it to brave the industry headwinds. Gap recently chalked out various strategic plans to keep track of the rapid changes in the apparel industry. The company intends to speed up its transformation plan through meaningful changes to its product portfolio and operating capabilities worldwide. In this regard, management plans to focus on growing Gap’s brands in regions which offer greater structural advantage and potential to expand market share, while closing underperforming stores.
Further, the company remains keen on streamlining its operating model by creating a more proficient global brand structure, which will enable its brands to utilize scale advantages more efficiently. Clearly, the company remains committed to positioning itself better for long-term growth by setting its priorities right and channelizing its resources accordingly.
Gap’s efforts toward global expansion are also noteworthy. Over the past few years, the company aggressively expanded its global footprint across emerging markets including China, Russia, South Africa and certain Latin American countries. Going forward, management intends to remain committed toward store growth, with primary focus on greater China, Athleta and global outlet stores.
We also commend Gap’s focus on enhancing its e-commerce and omni-channel capabilities in response to the brick-and-mortar retailing concept losing luster on account of customers’ shift toward online shopping. As part of its omni-channel endeavors, Gap has been continuously extending its “find-in-store”, “Reserve-in-Store” and “Order in Store” facilities across various stores. Also, the company recently came up with an app – DressingRoom – which will enable customers to try clothes through reality experiences generated via smart phones. We believe that these initiatives should boost Gap’s top line in the long run.
All these factors also helped the company to post decent fourth-quarter 2016 results, wherein earnings continued with its in-line performance and sales marked its third straight beat. Also, fuelled by positive comps, the top line rose year over year for the first time in the last eight quarters. This was largely backed by a successful holiday season that benefitted from continued strength at Old Navy.
However, results continued to be hurt by foreign currency headwinds, costs associated with planned store closures, and persistent weakness across Banana Republic. Further, management expects currency woes to hurt fiscal 2017 results, as is clear from its soft outlook, which led to downward estimate revisions. Moreover, stiff competition from other major players remains a threat, as it can weigh upon Gap’s market share and overall operating performance.
Nonetheless, Gap’s constant shareholder-friendly moves, the aforementioned growth initiatives and its impressive stock movement should be enough to draw investors’ attention.
Stocks to Consider
Some better-ranked stocks in the same industry include The Children's Place, Inc. (PLCE - Free Report) , Kate Spade & Company and Foot Locker, Inc. (FL - Free Report) . While Children's Place and Kate Spade sport a Zacks Rank #1 (Strong Buy) each, Foot Locker currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Children's Place has an average positive earnings surprise of 39% in the trailing four quarters. The stock has a long-term growth rate of 8%.
Kate Spade, with long-term earnings per share growth rate of 28.3%, has delivered positive earnings surprise in the last two quarters.
Foot Locker has delivered positive earnings surprise in the last three quarters. The stock has a long-term growth rate of 9.7%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>