Stifel Reiterates Hold on Gap, Inc. (GPS); Blames Distribution Fire for Comp Decrease
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Stifel reiterated a Hold rating and $25.00 price target on Gap, Inc. (NYSE: GPS) following the company's September comp sales report. Comp sales decreased 3%, in-line consensus estimates. Management believes that a fire at the company’s Fishkill, NY distribution center is to blame for the loss.
Analyst Richard Jaffe commented, "September comp sales decreased 3%, in-line with our estimate and consensus. Management believes that comp store sales were negatively impacted by 3% due to a fire at the company’s Fishkill, NY distribution center (comps in October are also anticipated to be negatively impacted by 3%). The fire had the most significant impact on Gap brand’s online assortment but also affected Old Navy and Banana Republic. Management indicated that the lost sales from the fire will be more than offset by higher maintained merchandise margin than originally anticipated, making a strong case for Gap to operate with significantly leaner inventories. Given poor results at Gap and Banana Republic, likely attributable to unappealing merchandise assortments, we don’t view the product lost in the fire as an important loss but rather a fortuitous reduction in inventory."
Shares of Gap, Inc. closed at $22.78 yesterday.
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