Sterne Agee CRT Remains Sidelined Following Gap, Inc. (GPS) Comp Miss

Gap, Inc. (NYSE: GPS)
maintains a Neutral rating on Gap, Inc. (NYSE: gps), and lowered the price target to $38.00 (from $41.00), after GPS misses comps. GPS posted April comps of -12%, well below the Street's -7% estimate. The company was able to hit the Street's EPS estimate of ($0.02).

Sterne Agee CRT analyst, Ike Boruchow, commented on GPS's guidance, saying, "Despite the material April comp miss, management issued Q1 EPS guidance in the range of $0.55 to $0.56 - coming in slightly ahead of Street expectations of $0.54. However, the guide includes a one-time $0.02 benefit related to a reversal of interest expense from the favorable settlement of a tax matter. Given that sales likely came in below expectations, we believe GPS continues to deftly rein in SG&A expenses in order to manage the "E", though we wonder how long management can sustain this strategy absent a pick-up in top-line trends at core Gap."

Boruchow also added, "We are lowering EPS estimates in FY15/FY16 to $2.78/$2.96 (from $2.80/$3.08) and lowering our 12-month PT to $38 (from $41). Our new target is based on 12-13x 2016E earnings, given ongoing top-line weakness. Although Old Navy has very strong momentum at the moment, we see little visibility into the turnarounds of the Gap and BR concepts, and believe weakness could persist for some time. Thus, we remain sidelined as we wait for greater clarity into a turnaround at the company's namesake brand."

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

Shares of Gap, Inc. closed at $39.87 yesterday.

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