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Gap's (GPS) Dismal Sales Trend Lingers: Threat to Stock?
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The Gap, Inc. (GPS - Free Report) seems to be losing ground as it has been struggling with waning sales for over a year now. This Zacks Rank #5 (Strong Sell) stock has plunged nearly 49% over the past one year, as sales continue to be hurt by foreign currency headwinds. Also, persistent underperformance by the company’s brands has been a factor behind its murky story.
Moreover, Gap has witnessed a downtrend in the Zacks Consensus Estimate ever since it reported first-quarter fiscal 2016 results on May 19. Evidently, over the past 30 days, the consensus estimate for fiscal 2016 and fiscal 2017 has dropped 4.1% to $1.85 and 2.4% to $2.05, respectively.
Though the company posted in-line earnings for the first quarter, sales lagged estimates for the fifth straight quarter. Sales and comparable-store sales (comps) declined year over year as strong currency headwinds hurt the top line by $20 million in the quarter.
Apart from continued comps declines at the Banana Republic and Gap Global brands, first-quarter comps were impacted by a fall in Old Navy comps, which was once a savior for the company.
In fact, the weak comps trend also lingered into the second quarter, as is reflected by the company’s May comps, which fell 6%. The decline in May comps can be attributed to the shift of the Memorial Day holiday period from May to June this year. Also, soft sales at each of Gap’s brands led to the downside. This marked the company’s 14th consecutive month of negative comps.
While these factors are likely to keep us on the sidelines, Gap is making efforts to turn around its business. Concurrent with its earnings release, management chalked out various strategic plans to keep track of the accelerated pace of change in the apparel industry. The company intends to speed up its transformation plan by bringing meaningful changes to its product portfolio and operating capabilities worldwide.
Though Gap is encouraged by its long-term growth strategies, persistence of the currency headwinds is likely to impact future results. Also, a tough retail environment and soft consumer demand and traffic continue to pose concerns, thus keeping the most stoic investor on his toes.
Stocks to Consider
Better-ranked stocks in the same industry include The Children's Place, Inc. (PLCE - Free Report) and Destination XL Group, Inc. (DXLG - Free Report) , each with a Zacks Rank #2 (Buy). Another stock worth considering in the related textile-apparel industry is Delta Apparel Inc. (DLA - Free Report) , sporting a Zacks Rank #1 (Strong Buy).
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Gap's (GPS) Dismal Sales Trend Lingers: Threat to Stock?
The Gap, Inc. (GPS - Free Report) seems to be losing ground as it has been struggling with waning sales for over a year now. This Zacks Rank #5 (Strong Sell) stock has plunged nearly 49% over the past one year, as sales continue to be hurt by foreign currency headwinds. Also, persistent underperformance by the company’s brands has been a factor behind its murky story.
GAP INC Price
GAP INC Price | GAP INC Quote
Moreover, Gap has witnessed a downtrend in the Zacks Consensus Estimate ever since it reported first-quarter fiscal 2016 results on May 19. Evidently, over the past 30 days, the consensus estimate for fiscal 2016 and fiscal 2017 has dropped 4.1% to $1.85 and 2.4% to $2.05, respectively.
Though the company posted in-line earnings for the first quarter, sales lagged estimates for the fifth straight quarter. Sales and comparable-store sales (comps) declined year over year as strong currency headwinds hurt the top line by $20 million in the quarter.
Apart from continued comps declines at the Banana Republic and Gap Global brands, first-quarter comps were impacted by a fall in Old Navy comps, which was once a savior for the company.
In fact, the weak comps trend also lingered into the second quarter, as is reflected by the company’s May comps, which fell 6%. The decline in May comps can be attributed to the shift of the Memorial Day holiday period from May to June this year. Also, soft sales at each of Gap’s brands led to the downside. This marked the company’s 14th consecutive month of negative comps.
While these factors are likely to keep us on the sidelines, Gap is making efforts to turn around its business. Concurrent with its earnings release, management chalked out various strategic plans to keep track of the accelerated pace of change in the apparel industry. The company intends to speed up its transformation plan by bringing meaningful changes to its product portfolio and operating capabilities worldwide.
Though Gap is encouraged by its long-term growth strategies, persistence of the currency headwinds is likely to impact future results. Also, a tough retail environment and soft consumer demand and traffic continue to pose concerns, thus keeping the most stoic investor on his toes.
Stocks to Consider
Better-ranked stocks in the same industry include The Children's Place, Inc. (PLCE - Free Report) and Destination XL Group, Inc. (DXLG - Free Report) , each with a Zacks Rank #2 (Buy). Another stock worth considering in the related textile-apparel industry is Delta Apparel Inc. (DLA - Free Report) , sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>