Goldman Sachs Raises Gap PT To $19

Goldman Sachs reports that Gap, Inc.'s GPS 3Q EPS of $0.48 “was essentially in-line with our estimate and the preannounced $0.47-0.48.” As reported, total sales were +2% with comps flat. “SG&A reductions offset softer than expected gross margin (merchandise margin down 180 bps),” Goldman Sachs writes. “Inventory/ft +9% is still trending higher than sales, but the spread is not quite as wide as it appears on the surface (thanks to closing underproductive space, GPS' sales/ft is actually +4% despite comp sales being flat).” Goldman Sachs is maintaining its 2010E EPS, but raise 2011/12E on lower SG&A and some incremental repurchase (to $1.83/1.87 from $1.72/1.76). Based on higher earnings, “we raise our 6-month, multiple-based target to $19 from $18.” Gap currently trades at $20.91.