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Comp Sales At The Gap Slip Further Than Expected

Cowen’s Oliver Chen mentioned that Gap Inc GPS 2.24% reported comps of -3 percent for August, below the consensus, driven by the strength in Old Navy bring offset by weakness at the Gap brand and Banana Republic.

Chen maintained a Market Perform rating on the company, with a $25 price target.

“Mgmt. noted that GPS has contingency plans in place to help mitigate the impact from the recent fire in a Fishkill, NY DC,” the analyst stated.

August Comps

The August comps of -3 percent marked an improvement of 200 bps on the two-year stack to 5 percent, as compared to the July two-year stack run rate of -7 percent.

The Gap brand reported August comps of -5 percent, well below the estimate and the consensus, while Banana Republic reported -10 percent comps for August, also well below expectations.

However, comps at Old Navy beat the estimate and the consensus, coming in at +1 percent.

Next Catalyst

Chen expects the next catalyst for the stock to be the announcement of the September comps on October 6, at Gap’s AMC.

“By division, Gap brand's comp comparison gets 800bps more challenging than August, BR's comp comparisons gets 100bps more challenging, and Old Navy's comp comparisons gets 200bps easier,” the analyst added.

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DateFirmActionFromTo
Aug 2016CitigroupMaintainsNeutral
Aug 2016NomuraMaintainsNeutral
Aug 2016Deutsche BankMaintainsSell

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