Shares of The Gap, Inc. (GPS) jumped 3.2% during after-market trading hours yesterday following better-than-expected sales results for the 4-week period ended Nov 29. This apparel retailer witnessed an upsurge of 6% in its comparable-store sales (comps), compared with a 2% increase witnessed last year, on the back of growth registered across Old Navy and Banana Republic Global brands.
Comps at Old Navy Global brand surged 18% compared with 3% gain last year, while at Banana Republic Global brand it grew 2% contrary to a 1% decline last year. On the other hand, comps at the Gap Global brand descended 4% during the month against a 2% improvement last year.
The company’s net sales for the month increased 6% to $1.72 billion compared with $1.63 billion in the year-ago period. Net sales increased on account of outstanding performance delivered by Old Navy, as consumers responded well to its holiday merchandise.
In line with its strategy of global expansion, Gap last month announced its collaboration with leading European fashion ecommerce site, Zalando. Per the partnership, Gap will introduce its online shop within Zalando, where the former will offer a wide array of items including accessories and clothing for Gap Women, Gap Men, GapKids and babyGap, beginning in summer 2015.
The company’s focus on global expansion is also evident from its store expansion plans, updated during its third-quarter fiscal 2014 results, which entails opening 185 company-operated outlets in fiscal 2014, with primary focus on China, Old Navy in Japan, Athleta and global outlet stores.
Gap’s third quarter results, released last month, disappointed on the sales and earnings front as both came below the Zacks Consensus Estimate. As a result, the company lowered its earnings forecast. Management now anticipates fiscal 2014 earnings in the range of $2.73–$2.78 compared with $2.95–$3.00 per share projected earlier. The dismal performance, trimmed earnings guidance and downward revision in the Zacks Consensus Estimate is well reflected in its Zacks Rank #4 (Sell).
Other Favorably Ranked Stocks
Other better-ranked stocks in the retail sector include DSW Inc. (DSW), L Brands, Inc. (LB) and American Eagle Outfitters, Inc. (AEO), each carrying a Zacks Rank #2 (Buy).
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