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Gap Posts Positive January Comps

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The Gap Inc. (GPS - Free Report) posted comps increase of 1% for Jan 2014, compared with an 8% increase in the prior-year period. Brand-wise, the company registered improved comps performance at Gap and Old Navy, while Banana Republic reported negative comps.

Comps at Gap Global rose 1% compared with a 4% increase in the prior-year period. Old Navy Global's comps improved 4% versus a 12% increase last year. However, comps at Banana Republic Global dipped 10%, as against a 9% rise recorded last year.

Net sales for the 4 weeks ended Feb 1, 2014 came in at $899 million, down from $1.13 billion reported for the 5-week period ended Feb 2, 2013.

Notably, the company’s January, fourth quarter and fiscal 2013 comps results are compared with the 4-week, 13-week, and 52-week periods ended February 2, 2013, respectively as fiscal 2012 included an additional 53rd week. Moreover, the company’s top-line results for the above mentioned periods were impacted by the absence of the additional week in fiscal 2013.

Shares of this leading apparel retailer for men, women, children and babies soared to a high of $41.49 (up 4.5%) in the afterhours trading session yesterday, following the release of better-than-expected comparable store sales results for January and the fourth quarter as well as an encouraging fourth-quarter guidance. However, the stock closed after market trade returned to the regular trade closing price of $39.71.

While Gap managed to post better-than-expected comps in an otherwise difficult month, comp results for most retailers were below expectations. Comps of retailers including The Buckle Inc. (BKE - Free Report) , The Cato Corporation and Zumiez Inc. were down 6.6%, 8% and 7.6%, respectively, impacted by winter storms during January.

Coming back to Gap, the company reported fourth quarter comps increase of 1% against a 5% rise reported in the year-ago quarter. This marked the company’s 8th positive comps growth in a row. Net sales for the quarter totaled $4.58 billion, down 3.2% from $4.73 billion in the fourth quarter of fiscal 2012. Segment-wise, the quarter’s comps were up 1% at Gap Global, remained flat at Old Navy and were down 3% at Banana Republic Global.

For fiscal 2013, the company reported a 2% rise in comps compared to a 5% increase reported last year. Net sales for the year rose 3.2% to $16.15 billion from $15.65 billion reported in fiscal 2012.

Encouraged by the positive comps results, the company came up with a favorable earnings per share forecast for the fourth quarter and fiscal 2013. The company projects fourth-quarter earnings per share to range from 65 – 66 cents, while earnings per share for fiscal 2013 are expected to grow in the mid-to-high teens range. Earnings growth guidance for fiscal 2013 compares with 49% earnings growth registered in fiscal 2012. Currently, the Zacks Consensus Estimate for the fourth quarter stands at 60 cents per share, way below the company’s guidance range.

Gap currently carries a Zacks Rank #3 (Hold) and is scheduled to release its fourth-quarter and fiscal 2013 financial results on Feb 27, 2014.

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