Stifel Still Positive on Gap (GAP) Following Q3 Numbers, But Sees Little Improvement in Q414

Stifel is out with initial thoughts on Gap, Inc. (NYSE: GPS) following Q3 results reported after markets closed on Thursday. The firm has Gap at Buy with a price target of $48.

Analyst Richard Jaffe commented Gap reported 3Q EPS of $0.80 versus $0.72 LY, above the high end of its recently established guidance range of $0.78-$0.79, $0.01 above our estimate and $0.04 above consensus.

Jaffe continued:

• Comps Down 2 percent - In 3Q, total company comps decreased 2 percent, with Gap, Banana and Old Navy comping (5) percent, 0 percent and +1 percent, respectively. Gap division was challenged during the quarter due to an unappealing assortment. While we believe the necessary markdowns were taken in advance of the Holiday floorset, we believe current assortments remain unappealing. Old Navy continues to outperform, driven by an inspiring product assortment and compelling marketing. Old Navy is the best example where compelling product, great value and effective messaging lifted results. Banana’s assortment continues to make incremental improvements, and the newest floorset is appealing, in our opinion.
• Disciplined Expense and Inventory Management Despite Sales Shortfall – SG&A increased 3 percent, well below management’s initial guidance of approximately 8 percent. In addition, inventory was well managed, down 2 percent on a square foot basis. In addition, gross margin improved 20 bps.

For an analyst ratings summary and ratings history on Gap, Inc. click here. For more ratings news on Gap, Inc. click here.

Gap, Inc. closed at $40.14 yesterday.

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