The Gap's Comparables Decline - Analyst Blog

The Gap Inc. (GPS) reported a decline of 3% in same-store sales for the five-week period ending January 2, 2010. Results substantially lagged a 2% growth in December 2009.

The shrinking of same-store sales stemmed from Gap North America reporting an 8% decrease, Old Navy North America reporting a 2% decline and International reporting a 4% slide. However, 1% same-store sales increase at Banana Republic North America came as a partial offset.

The company reported net sales of $2.0 billion in December 2010, flat with the year-ago figure.

Gap's same store sales increased 1% year to date compared with a 4% decline in the year-ago period. Net sales improved 3% to $13.82 billion from $13.40 billion for the same period in fiscal 2009.

The company reiterated its full year 2010 guidance of $1.77 to $1.82 per share, representing growth of 12 to 15%.

The Zacks Consensus Estimate for fiscal fourth-quarter 2010 is 54 cents per share. For fiscal years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $1.81 per share and $1.92 per share.

We maintain our Neutral recommendation on Gap. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

American Eagle Outfitters Inc. (AEO), competing with Gap, also reported a same-store sales decline of 11% for the five-week period ending January 1, 2011. Sales dropped 6% over the prior-year period to gross $499 million.

However, The TJX Companies Inc. (TJX), another of Gap's retail peers, posted a slight same-store sales increase of 2% for December 2010. Net sales increased 6% year over year to gross $3 billion for the five-week period ended January 1, 2011

Based in San Francisco, California, The Gap Inc. is a premier international specialty retailer offering a diverse range of clothing, accessories, and personal care products for men, women, children and babies. Its flagship brands include Gap, Banana Republic, Old Navy, Piperlime and Athleta.

 
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