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Gap Shares Slide After Same-Store Sales Disappoint

Strong results for the apparel retailer's ever reliable Old Navy brand of clothing failed to offset a fall in comparable store sales for the Gap brand.
Gap Store | Source: Shutterstock
By
  • Reuters

SAN FRANCISCO, United States — Shares of Gap Inc sank 8 percent on Friday after quarterly same-store sales disappointed on expectations, driving a raft of price target cuts on Wall Street.

At least seven brokerages cut their targets for the stock after what was the first same-store sales miss compared to consensus estimates in six quarters.

Strong results for the apparel retailer's ever reliable Old Navy brand of clothing failed to offset a fall in comparable store sales for the GAP brand.

"Gap brand [is] just plain disappointing; no way to sugarcoat it," Jefferies analyst Randal Konik said in a note.

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The San Francisco-based company said it had struggled to clear inventories in an unusually cold quarter that forced it to discount many of its products.

Konik who is rated 4 of 5 stars according to Thomson Reuters StarMine, cut his price target on the stock to $45 but remained the most bullish.

Gap chief executive Art Peck said the inventory issues were a one time correction and stuck by the company's existing full year earnings forecast.

Analysts at RBC Capital Markets said the stock would continue to remain pressured until investors had more confidence that efforts to turn around the Gap brand were having an impact.

RBC lowered its price target by $1 to $35. The stock's median price target is $33. It fell to around $30 in premarket on Friday, from a close of $32.95 before the results numbers on Thursday.

"Old Navy had been firing on all cylinders but the performance in 1Q was not enough to drive margin improvement at the company level despite representing just under half the business," said SunTrust Robinson Humphrey analyst Pamela Quintiliano.

"We have little to hang our hat on as of yet."

By Uday Sampath.

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