Gap (GPS), Express (EXPR) Checks Show Higher August Promotions - Wedbush

In a research note, analyst Morry Brown of Wedbush discussed trends in specialty retail. Checks indicated higher promotions at Gap, Inc. (NYSE: GPS) and Express (NYSE: EXPR), and improving merchandise at Abercrombie & Fitch (NYSE: ANF). Other stocks mentioned in the report include American Eagle Outfitters (NYSE: AEO) and Aeropostale, Inc. (NYSE: ARO).

"Both Gap and BR have started August off more promotional than last year, with Gap running 35% for its friends and family event versus 30% off LY, and BR running 40% off the entire store last week versus 35% LY. While the promotions are only modestly above LY, and clearance inventory is improved from July, we note consensus estimates assume a +30 bps increase in gross margin during 3Q. We believe promotional cadence will need to slow relative to LY over the next 6-8 weeks for GPS to achieve consensus margin expectations," said Brown.

"Express continues to promote more aggressively than LY, with nearly the entire store on sale so far in August. All women’s jeans have been priced at $39.90 for the last two weeks (a 50-60% discount), steeper than LY’s 40% off denim promotion. The majority of in store promotions outside of denim are in the 30-40% range. We continue to believe the company’s outsized exposure to the down-trending women’s denim category is a risk into fall," she continued.

"We believe A&F looks more on-trend for BTS than it has in recent years; the current floor set hits on many key trends for fall, including longer length sweaters, plaid shirts and dresses, deconstructed denim and leather jackets. Promotional activity remains intense, however, with nearly the entire store on sale, and pricing does remain an issue," added the analyst.

For an analyst ratings summary and ratings history on Abercrombie & Fitch click here. For more ratings news on Abercrombie & Fitch click here.

Shares of Abercrombie & Fitch closed at $41.60 yesterday.

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