Gap (GPS) Posts Solid January and Q4 Comps, Stock Rises
It seems that the holiday mood continues in January for the apparel retailer The Gap Inc. GPS, which posted solid comparable store sales (comps) and sales results for Jan 2017 (four weeks ended Jan 28, 2017) as well as fourth-quarter fiscal 2016. Further, the company raised its adjusted earnings forecast for fiscal 2016, while providing a robust fourth-quarter fiscal 2016 guidance.
Despite a difficult retail environment, the company’s top-line for the fourth quarter gained from the solid holiday season performance and continued enthusiasm in January. The company’s efforts to strengthen brands portfolio and recapture market share seems to be paying off.
Following the strong January and fourth-quarter results, the company’s shares increased 2.3% in the after-hours trading session yesterday. Overall, shares of Gap have fallen 1.2% in the past one year, outperforming the Zacks categorized Retail–Apparel/Shoe industry’s decline of 11.1% in the same period.
January 2017 Sales
Gap’s comps improved 1% in January, compared with an 8% decline in the same period of 2016. Net sales for the four-weeks ended Jan 28, 2017 came in at $828 million, up 2% from $813 million for the four-weeks ended Jan 30, 2016.
Brand-wise, the company’s comps improved at both the Gap and Old Navy brands, while the performance of Banana Republic was slightly lackluster.
Comps at Gap Global rose 3%, following the 6% dip recorded in the year-ago period. Further, Old Navy comps jumped 2%, compared with a 6% decline in the comparable month of 2016. However, performance at Banana Republic Global continued to be weak with the brand recording a 4% decline, narrower than the 17% fall witnessed in Jan 2016.
Fourth-Quarter Fiscal 2016 Results
The company’s comps for the fourth quarter rose 2%, compared with a 7% decline recorded in fourth-quarter fiscal 2015. Net sales of $4.43 billion inched up 1% year over year from $4.39 billion in the prior-year quarter.
Comps at Gap Global remained flat compared with a 3% dip recorded in the prior-year quarter. Further, Old Navy recorded a 5% increase compared with an 8% decline in the prior-year quarter. Meanwhile, comps for Banana Republic Global dropped 4% compared with a 14% fall witnessed in the prior-year quarter.
Guidance Update
Backed by the solid sales results in the holiday period quarter, the company raised its adjusted earnings forecast for fiscal 2016 and provided robust earnings guidance for the fiscal fourth-quarter. For fiscal 2016, the company now anticipates adjusted earnings per share in the range of $2.01–$2.02. Following the solid December sales, the company had projected adjusted earnings for fiscal 2016 to come in slightly above the high end of its previous guidance of $1.87−$1.92 per share.
On GAAP basis, the company estimates earnings to range between $1.68 and $1.69 per share. Further, the company expects effective tax rate for fiscal 2016 to be 40%, or nearly 39% excluding restructuring charges and other one-time items.
For the fiscal fourth quarter, the company expects adjusted earnings per share in the range of 50–51 cents, while GAAP earnings per share is anticipated in the band of 54–55 cents. The company’s adjusted earnings per share guidance compares favorably with the current Zacks Consensus Estimate of 45 cents.
Apart from Gap, Costco Wholesale Corporation COST and Zumiez Inc. ZUMZ posted comps growth of 4%, 7% and 9.4%, respectively, for January. However, comps for the Victoria Secrets owner, L Brands Inc. LB declined 4% in January.
Gap, which is scheduled to release fourth-quarter fiscal 2016 earnings results on Feb 23, 2017, currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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