GAP's Positive Comparables - Analyst Blog

Gap Inc. (GPS) reported a 2% increase in same-store sales for the month of October, after sliding 2.0% in September 2010 and recording a flat growth in August 2010.

The 2.0% increase in same-store sales at Gap emanated from a growth of 1% in international comparable-store sales, a 5% growth at Gap North America, and a 2.0% growth in Old Navy North America countered by 1% shrinkage at Banana Republic North America.

After inching up 1.0% in September 2010 to $1.34 billion, total sales for the month under review increased by 4.0% to $1.19 billion from $1.14 billion in the comparable period last year.

Third Quarter Sales and Same-Store Sales

As per preliminary reports, the company registered a top-line growth of 2.0% reaching $3.65 billion in the third quarter of 2010 from $3.59 billion recorded in the prior-year quarter. Comparables-store sales for the quarter came in flat.

GAP currently operates 3,100 stores in Canada, the United Kingdom, France, Ireland and Japan. The company is also increasing its international exposure. Currently, it has franchise agreements in Asia, Europe, Latin America, and the Middle East. The turnaround story in the U.S. has helped leverage the company to expand overseas and in the online space.

The San Francisco-based retailer expects earnings for fiscal 2010 in the range of $1.77–$1.82 per share. The Zacks Consensus Estimate of $1.79 lies mid-way in the guided range.  The company expects to earn 47 to 48 cents a share in the third quarter of fiscal 2010.

GAP's shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating. Our long-term recommendation for the stock remains Neutral.


 
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