Oppenheimer Has Perform On Gap After Earnings (GPS)

Oppenheimer & Co. has a Perform rating on The Gap Inc. GPS after it reported earnings yesterday. In a note to clients, Oppenheimer writes, "GPS reported FY4Q10 EPS of $0.60 vs. our/consensus of $0.57. Previously reported revenues increased 3% to $4.364B while comps were flat vs. +2% ly (+1% at Banana Republic NA, +1% at Old Navy NA, -1% at International, -2% at Gap NA). GM decreased 130 bps to 38.2% with 40 bps of leverage in buying/occupancy and 160 bps of deleverage in merchandise margins. SG&A decreased 100 bps to 24.7%. Looking ahead, we believe inconsistent traffic combined with commodity headwinds provide limited merchandise margin opportunity. Trading at 11x our FY12 EPS of $2.04 (vs. a historical average of 13x), we believe GPS is fairly valued at current levels given ongoing domestic and international execution risk." Shares of GPS gained 21 cents in after-hours trading yesterday to close at $22.70, a gain of 0.9%.