Gap Hits 52-Week Low After JPMorgan Downgrade

Clothing retailer Gap Inc GPS continues to struggle with operational issues and could oversee a poor performance in the upcoming holiday season.

The Analyst

JPMorgan's Matthew Boss downgraded Gap from Neutral to Underweight with a price target lowered from $30 to $24.

The Thesis

Expectations for the parent company of Old Navy, Banana Republic and the namesake Gap to recover is less certain today, CNBC quoted Boss as saying in a note. The company faces not only the prospect of a 250-basis point deceleration in same-store sales in fiscal 2018, but headwinds from higher transportation costs, rising wages and tariffs where direct sourcing exposure to China stands at 27 percent.

Gap is making changes to its supply chain to lower its direct sourcing exposure to China which stands at 22 percent, the analyst said. However, this would require multiple years given the company's large size, scale and specialization.

Boss said investors may have to wait until the first half of next year before a new leadership has any material impact.

Price Action

Shares of Gap hit a new 52-week low of $25.34 Thursday and closed at $25.56, down 5.8 percent on the day..

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