Gap Threads A Comeback: Turnaround Plan In Vogue, Says JPMorgan

A meeting with Gap Inc's GAP top management suggests that the company's turnaround remains on track, according to JPMorgan.

The Gap Analyst: Analyst Matthew Boss reiterated an Overweight rating and price target of $29.

The Gap Thesis: Although the portfolio is only in Phase 1 of the turnaround, the company appears on track to surpass "pre-pandemic results on an underlying basis," with more than 2% same-store-sales growth in 2025 on operating margins of over 8.0%, Boss said in the note.

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CEO Richard Dickson says the goal is to make "flywheel reinvestments to drive relevance across the brand portfolio and topline growth.

The Gap and Old Navy brands, which account for around 80% of the company's sales, are "on a path of 8+ consecutive quarters of market share gains & new customer acquisition," the analyst stated.

For Phase 2 of the turnaround, CFO Katrina O'Connell "cited a long-term model algorithm of low-to-mid-single-digit revenue growth and high-single-digit(+) operating income growth, which combined with FCF generation of $750M(+) on our model supports GAP's current +3.0% dividend yield and share repurchase accretion of ~4%," he further wrote.

GAP Price Action: Shares of Gap had declined by 1.34% to $22.01 at the time of publication on Monday.

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