FBR & Co. maintains Gap, Inc. (NYSE: GPS) at Market Perform with a price target of $22 following solid June sales results issued Thursday.

Analyst Susan Anderson, commented today: GPS reported June SSS of +2%, versus FBR/consensus of –3.3%/–3.9% and –1% LY. Management noted that sequential improvement in traffic, particularly at ON, contributed significantly to the comp beat. We would note that the MD shift also contributed significantly to the comp beat. We think inventory is positioned to be in line with 2Q inventory guidance of –LSD at this point. On a two-year stack basis, GPS improved, driven by significant improvement at Gap and BR. ON declined on a twoyear stack basis.

Management remains optimistic about new product for Gap and continues to see some green shoots; however, turnaround visibility remains low, and it could be further out than anticipated, given the time needed to regain the consumer and a highly competitive environment (potentially late 2016/early 2017). With recently announced international and operating model changes, we remain on the sidelines and look for comp stabilization, inflection at BR, a continued return to positive comps at ON, or a more attractive entry point, the analyst noted.

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