The Gap (GPS) Climbs on Same Store Sales Report
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The Gap Inc. (NYSE: GPS) reported same store sales for November remained flat versus the same period in 2006.
With the majority of the biggest apparel retailers reporting an increase in comparable store sales, announcing a 0% change in sales should seem like a negative for Gap, the largest publicly traded pure apparel retailer. On the other hand, the break-even same store sales number was quite a surprise to Wall Street: analysts covering the stock expected same store sales to decline by nearly 5% for the November month.
It seems the same store sales surprise is driving Gap higher today. Shares of Gap are up nearly 7% today, hitting a new 52-week high at $21.65.
With a P/E ratio around 21x current EPS of $0.97, shares of Gap are trading at a slight premium to peers within its apparel industry, which, on average, are trading at about 17.5x earnings. This premium is justified as Gap has one of the better EPS growth rates among its peers: about 26% vs 23% in its industry.
In contrast, Gap could be viewed as a little expensive based on several other fundamentals. First, with profit margins at ~5%, Gap has one of the lowest margins in its group. Also, despite strong growth recently, Gap has a high PEG ratio of 1.65 compared to some of the other top apparel retailers. When comparing the 5 largest apparel retailers, the next highest PEG ratio comes in at 1.14.
With the majority of the biggest apparel retailers reporting an increase in comparable store sales, announcing a 0% change in sales should seem like a negative for Gap, the largest publicly traded pure apparel retailer. On the other hand, the break-even same store sales number was quite a surprise to Wall Street: analysts covering the stock expected same store sales to decline by nearly 5% for the November month.
It seems the same store sales surprise is driving Gap higher today. Shares of Gap are up nearly 7% today, hitting a new 52-week high at $21.65.
With a P/E ratio around 21x current EPS of $0.97, shares of Gap are trading at a slight premium to peers within its apparel industry, which, on average, are trading at about 17.5x earnings. This premium is justified as Gap has one of the better EPS growth rates among its peers: about 26% vs 23% in its industry.
In contrast, Gap could be viewed as a little expensive based on several other fundamentals. First, with profit margins at ~5%, Gap has one of the lowest margins in its group. Also, despite strong growth recently, Gap has a high PEG ratio of 1.65 compared to some of the other top apparel retailers. When comparing the 5 largest apparel retailers, the next highest PEG ratio comes in at 1.14.
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