Leading apparel retail chain, Gap Inc's (GPS), comparable store sales climbed 6% in September 2012 (five-week period ended September 29, 2012) versus a 4% decline in the comparable prior-year period. Moreover, net sales in September totaled $1.45 billion, up 7.4% compared with the prior-year period sales of $1.35 billion.
The rise in comps reflects the company’s focus on delivering trend-right products to customers, as well as a solid store execution. During the period, the company registered strong demand for its products across all brands.
August comps at Gap North America increased 5% against a 4% decline recorded in the prior-year period. Banana Republic North America’s same-store sales were up 4% versus a 1% dip recorded in September last year. Results at its Old Navy North America segment reflected a robust 10% rise in comps compared with a 1% fall in the prior-year period. On the flip side, comps at the International business declined 3% in September, but were comparatively better than the 13% decline recorded in the prior-year period.
Year-to-date through September 29, 2012, the company’s net sales increased 6% to $9.71 billion compared with $9.12 billion in the prior-year period. Improvements in net sales were primarily driven by 5% growth in the company’s comps figure.
Gap is scheduled to release its October sales results on November 1, 2012.
Concurrently, two of the company’s competitors – Ross Stores Inc. (ROST) and Nordstrom Inc. (JWN) – reported improved same-store sales for the month of September. Nordstrom recorded a 4.4% growth in September comps, while comps at Ross increased 5%.
We believe the company’s relentless focus on turnaround strategies for improvising top line are paying off, which is reflected in its solid comps and sales performance in recent months. The company has posted positive comps for the last three consecutive months (July, August and September), while comps were flat in June and up in February, March and May. This reflects the significant progress the company has made despite the poor comps results in every month of fiscal 2011, with the exception of April and June.
Further, Gap’s long-term strategic moves, along with disciplined cost management measures will not only provide financial flexibility to the company, but also help it to reduce operating expenses. Moreover, Gap’s globally recognized brands complement one another, enabling it to leverage its position in the sector.
Currently, Gap’s shares maintain a Zacks #2 Rank, which translates into a short-term Buy rating. Our long-term recommendation on the stock remains ‘Outperform’.Read the Full Research Report on GPS
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