Janney Montgomery Scott Downgrades Gap, Inc. (GPS) to Neutral

Janney Montgomery Scott downgraded Gap, Inc. (NYSE: GPS) from Buy to Neutral with a fair value target of $41.00.

Analyst Adrienne Tennant cited 1) inventory that continues to grow faster than sales, thereby resulting in ongoing margin pressure (see Inventory Analysis on page 5); 2) ongoing deeper year-over-year promotions suggesting a still highly competitive backdrop (see Promotional Analysis on page 4); 3) Gap division product that is off-target, pressuring margin and comp, and we believe will take time to remedy (Gap Global division is roughly 39% of total sales); and 4) EPS growth that is reliant on SG&A control and share repurchase to offset gross margin pressure. "

The firm also lowered first half estimates; 1Q14 goes to $0.55 from $0.67 (versus consensus of $0.67) and 2Q14 goes to $0.60 from $0.70 (versus consensus of $0.69).

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 $39.29 yesterday.

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