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Will Gap's (GPS) Strategic Growth Plans Drive Q2 Earnings?
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The Gap, Inc. (GPS - Free Report) is slated to report second-quarter fiscal 2018 results on Aug 23. The company has delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 3.4%.
The Zacks Consensus Estimate for second-quarter earnings is pegged at 72 cents, which has been stable in the past 30 days but reflects a year-over-year improvement of 24.1%.
Let’s delve deeper to see how things are shaping up prior to the quarterly earnings announcement.
Things You Must Know Ahead of 2Q18
Gap’s focus on enhancing product quality and responsiveness to changing consumer trends is commendable. In this regard, the company has been making constant efforts to bolster digital and mobile offerings alongside improving product acceptance. Additionally, its growth strategy that mainly focuses on the Old Navy and Athleta brands bodes well. Over the next few years, the company expects these strategies to create about $500 million in expense savings and plans to reinvest a portion of those savings in its growth goals.
Gap has also been enhancing its e-commerce and omni-channel capabilities by adopting a number of initiatives. Evidently, the company has increased its online presence across all its brands and is likely to launch the buy online, pick-up in store service, a new personalization engine and significant investments in its omni-channel services. As a result, store associates are being able to enrich customer experiences, thus highlighting the company’s focus on augmenting omni-channel and digital operations.
In the to-be-reported quarter, these initiatives are likely to boost the company’s top-line performance. Notably, Gap has surpassed the sales estimates in last six quarters now. The Zacks Consensus Estimate for sales stands at $3.99 billion, indicating an increase of 5% from the year-ago actual figure. The same for Old Navy and Banana Republic is pegged at $1,902 million and $605 million, up 8.3% and 4.5% year over year, respectively.
Also, Gap’s comparable-store sales (comps) improved for the sixth straight quarter in first-quarter fiscal 2018. This upside was driven by strong momentum across Old Navy brand that has been gaining from strength in category and increased traffic. Apparently, the consensus estimate for quarterly comps growth stands at 1.3% compared with 1% rise in comps in the second quarter of fiscal 2017.
However, Gap has been witnessing softness across its namesake brand for quite a while now. Apparently, comps fell 4% at Gap brand in first-quarter fiscal 2018 mainly due to operational headwinds across timing of inventory, breadth of the product assortment and shortage of gaps in certain categories. Unfortunately, this will continue hurting the brand’s comps in the fiscal second quarter as well. Softness across Gap brand remains a concern, which might further dent the overall comps growth and profitability. The consensus mark for sales at this brand stands at $1,229 million, down 0.2% year over year.
Zacks Model
Our proven model does not show that Gap is likely to beat earnings estimates in the fiscal second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Though Gap’s Zacks Rank #2 increases the predictive power of earnings beat, its Earnings ESP of -1.27% makes surprise prediction difficult.
Stocks Likely to Beat Earnings
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:
Dollar Tree, Inc. (DLTR - Free Report) has an Earnings ESP of +1.55% and a Zacks Rank #2
Ross Stores, Inc. (ROST - Free Report) has an Earnings ESP of +2.91% and a Zacks Rank of 3.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Will Gap's (GPS) Strategic Growth Plans Drive Q2 Earnings?
The Gap, Inc. (GPS - Free Report) is slated to report second-quarter fiscal 2018 results on Aug 23. The company has delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 3.4%.
The Zacks Consensus Estimate for second-quarter earnings is pegged at 72 cents, which has been stable in the past 30 days but reflects a year-over-year improvement of 24.1%.
The Gap, Inc. Price, Consensus and EPS Surprise
The Gap, Inc. Price, Consensus and EPS Surprise | The Gap, Inc. Quote
Let’s delve deeper to see how things are shaping up prior to the quarterly earnings announcement.
Things You Must Know Ahead of 2Q18
Gap’s focus on enhancing product quality and responsiveness to changing consumer trends is commendable. In this regard, the company has been making constant efforts to bolster digital and mobile offerings alongside improving product acceptance. Additionally, its growth strategy that mainly focuses on the Old Navy and Athleta brands bodes well. Over the next few years, the company expects these strategies to create about $500 million in expense savings and plans to reinvest a portion of those savings in its growth goals.
Gap has also been enhancing its e-commerce and omni-channel capabilities by adopting a number of initiatives. Evidently, the company has increased its online presence across all its brands and is likely to launch the buy online, pick-up in store service, a new personalization engine and significant investments in its omni-channel services. As a result, store associates are being able to enrich customer experiences, thus highlighting the company’s focus on augmenting omni-channel and digital operations.
In the to-be-reported quarter, these initiatives are likely to boost the company’s top-line performance. Notably, Gap has surpassed the sales estimates in last six quarters now. The Zacks Consensus Estimate for sales stands at $3.99 billion, indicating an increase of 5% from the year-ago actual figure. The same for Old Navy and Banana Republic is pegged at $1,902 million and $605 million, up 8.3% and 4.5% year over year, respectively.
Also, Gap’s comparable-store sales (comps) improved for the sixth straight quarter in first-quarter fiscal 2018. This upside was driven by strong momentum across Old Navy brand that has been gaining from strength in category and increased traffic. Apparently, the consensus estimate for quarterly comps growth stands at 1.3% compared with 1% rise in comps in the second quarter of fiscal 2017.
However, Gap has been witnessing softness across its namesake brand for quite a while now. Apparently, comps fell 4% at Gap brand in first-quarter fiscal 2018 mainly due to operational headwinds across timing of inventory, breadth of the product assortment and shortage of gaps in certain categories. Unfortunately, this will continue hurting the brand’s comps in the fiscal second quarter as well. Softness across Gap brand remains a concern, which might further dent the overall comps growth and profitability. The consensus mark for sales at this brand stands at $1,229 million, down 0.2% year over year.
Zacks Model
Our proven model does not show that Gap is likely to beat earnings estimates in the fiscal second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Though Gap’s Zacks Rank #2 increases the predictive power of earnings beat, its Earnings ESP of -1.27% makes surprise prediction difficult.
Stocks Likely to Beat Earnings
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:
Dollar General Corporation (DG - Free Report) has an Earnings ESP of +1.83% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dollar Tree, Inc. (DLTR - Free Report) has an Earnings ESP of +1.55% and a Zacks Rank #2
Ross Stores, Inc. (ROST - Free Report) has an Earnings ESP of +2.91% and a Zacks Rank of 3.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>