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What minimum wage means for Gap shoppers

Talking Numbers

As President Obama and others continue to beat the drum for higher minimum wages, one retailer has decided to take matters into their own hands.

Gap Inc., the parent company of Gap, Old Navy, and Banana Republic among others, is raising their minimum wage for all of its employees to $9 per hour in 2014 and $10 per hour in 2015. The company estimates it will affect 65,000 employees. In a message posted Wednesday on the company's website, Chairman and CEO Glenn Murphy writes:

"To us, this is not a political issue. Our decision to invest in frontline employees will directly support our business, and is one that we expect to deliver a return many times over."

Though Gap clearly states they did not make a political decision, President Obama wasted no time in issuing a statement saying, "I applaud Gap, Inc. for announcing that they intend to raise wages for their employees beginning this year…."

(Read: Back off, Washington! It's Gap's job)

The President has been pushing for a $10.10 per hour national minimum wage. He recently signed an executive order raising the minimum wage for new federal contractors to that rate, though it did not affect those who were previously contracted below a $10.10 hourly wage.

There are an estimated 16 million Americans working below $10.10 per hour. However, according to the non-partisan Congressional Budget Office, raising the minimum wage could cost half a million US workers their jobs as employers seek to cut costs to offset the required higher wages.

According to CNBC contributor Gina Sanchez, founder of Chantico Global, Gap Inc. has the flexibility to give its lowest-paid employees more money. The company's revenues for the last four reported quarters were $16.3 billion while its net income was $1.32 billion.

"Gap has the ability to pay right now," says Sanchez. "They have luxury brands all the way down to affordable brands…. I think that this is going to signal a shift for retailers to continue to differentiate themselves and sort of keep [workers] motivated and incentivized."

(Read: Gap to raise hourly pay to $10 in 2015; Wal-Mart remains 'neutral')

Steven Pytlar, Chief Equity Strategist at Prime Executions, sees strength with Gap besides just its product mix. He believes the stock's technicals signal a buy.

"The chart looks very strong," says Pytlar. "Gap has a story that's been really building for a long time."
After forming what he sees as a double bottom base over the past few months, the company's stock shot up earlier this month from around $37 to $42 on positive sales data and outlook.

"We see a gap higher," says Pytlar of the stock's quick jump on February 7. "That's a very strong indicator of demand for the stock."

Since then, the stock has remained around $42, indicating to Pytlar that buyers may not have been rushing in but sellers weren't clearing out of their positions.

"We don't see a lot of profit-taking in the stock," says Pytlar. "Usually, these are technical indicators that tell us the stock can move higher. So, we do remain positive on it."

To see the full discussion on Gap Inc. with Sanchez on the fundamentals and Pytlar on the technicals, watch the video above.


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