Needham & Company Reiterates a 'Hold' on Gap, Inc. (GPS); Traffic and Women’s Assortment at Gap Brand Remain Challenged

Needham & Company reiterates a 'Hold' on Gap, Inc. (NYSE: GPS).

Needham analyst says, "At ~10x our FY12 EPS estimate of $1.53, GPS is trading below the sector average of ~11x but in-line with the low–end of its long term organic growth rate of 10% to 12%, which we think is a fair valuation at this time given significant margin pressures in F2H11 due to higher sourcing costs and lack of pricing power. While we think that product continues to looks better Y/Y, we are concerned that increased promotional activity at both Gap and BR, (while effective traffic drivers) has trained the customer to wait for sales, eroding pricing power."

"We are increasing our FY11 EPS estimate by a penny to $1.49, up from $1.48 to reflect the penny upside to our $0.34 estimate in F2Q. Our F3Q and F4Q EPS estimates remain unchanged...Our F1Q, F2Q, F3Q, F4Q, and FY12 EPS estimates of $0.39, $0.34, $0.37, $0.43, and $1.53 respectively, remain unchanged."

For more ratings news on Gap, Inc. click here and for the rating history of Gap, Inc. click here.

Shares of Gap, Inc. closed at $15.52 yesterday.

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