Wedbush Lowers Price Target On Gap

According to Wedbush, Gap GPS price target is lowered to $19. Wedbush said that management reduced F11 guidance to below consensus levels alluding to a combination of challenging sales trends and unexpectedly high product costs in H2. “Specifically, management cited ~20% AUC increases in the value segment (Old Navy and Outlet ~35-40% of total sales) that will outweigh any AUR gains TY. Lastly, we also view the high inventory levels (+Teens), although partially for international growth, as another potential drag on overall earnings on top of the women's product design headwinds facing core Gap and Banana Republic brands. Though the company's international opportunity remains compelling (franchise sales up 43% in Q1), we are substantially reducing our forecasts for F11 and F12 and believe investors should remain on the sidelines.” Gap closed yesterday at $23.29.