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One Advisor’s Take on Gap Shares Now

Christina Medici Scolaro
Big Data Download
One Advisor’s Take on Gap Shares Now

On an execution level, Gap has been doing a lot of things right, but with the stock at this level, is it the right time to buy shares?

Bad weather this spring kept a lid on profits at a lot of retailers but that didn’t stop Gap from reporting positive comparisons. In the current quarter, Gap comparisons are up 6 percent on a two-year trend. Stacey Widlitz, president of SW Retail Advisors, points out that Gap is the only apparel player so far that has raised guidance this quarter. American Eagle lowered guidance as well as the apparel divisions of Wal-Mart and Target.

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Rejuvenating the company’s store portfolio is one of Gap’s key strategies. Gap has been trying to gain global market share through its six brands: Gap, Banana Republic, Old Navy, Piperlime, Altheta and Intermix. It’s been closing unprofitable stores and opening new stores in select locations. In the fourth quarter, 64 stores worldwide were closed, and in Asia, for example, the company opened 30 new stores.

It’s also continuing to push its online sales. Gap Chief Executive Glenn Murphy said the key to Gap’s success will be to make shopping seamless through digital strategy, while seizing the opportunity for Old Navy in many untapped international markets.

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Although, the company has been doing a lot of positive things, the stock is up 32 percent year to date. Widlitz said this is a clear turnaround in product and execution, however with such a positive move in the stock, she thinks it’s hard to jump in front of it from here.

Gap is set to report earnings after the market closes on Thursday. Earnings estimates are for 57 cents per share. Gap announced a quarterly dividend of 15 cents per share on Wednesday.

Gap’s competitors include American Eagle and Abercrombie & Fitch.

Widlitz does not own shares of stocks mentioned.

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