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Barron's Hints at Turnaround for Gap (GPS)

December 27, 2011 12:24 PM EST
An article in Barron’s over the weekend suggested investors may be missing the boat on solid online and international sales growth when valuing shares of Gap (NYSE: GPS). The stock is getting a modest boost Tuesday, up about 1.8 percent to $18.95 just after noon.

The company expects to generate 30 percent of its total sales from the online sector in 2013; direct online sales are increasing at a rate of 20 percent per year. Gap has increased its distribution area from eight countries in 2006 to 90 currently.

2011 was a tough year for Gap and other retail companies as the price of cotton hit a near-term peak. In addition to lower raw material costs next year, the company will be opening new Athleta stores, expected to quadruple sales.

Although Gap has been losing market share to the rising number of competitors in the market, the Barron's piece contends a strong buyback plan since 2004 could have put a floor into the stock. Barron's also points to Gap as a possible acquisition target, however no deals or offers have been announced yet. The family of the company's co-founder Donald Fisher currently owns a 20 percent stake in the company while Eddie Lampert's investment funds own a 7 percent stake.

Based on the company’s performance during 2012, Barron’s believes a number of offers -- both private and public -- to acquire Gap may be proposed.


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