The Gap, Inc. GPS is scheduled to report fourth-quarter fiscal 2021 numbers on Mar 3. The Zacks Consensus Estimate for the fiscal fourth quarter is pegged at a loss of 14 cents, suggesting a sharp decline of 150% from earnings of 28 cents reported in the prior-year quarter. The consensus mark has gone down by 16.7% in the past 30 days. For revenues, the consensus mark is pegged at $4.49 billion, indicating 1.5% growth from that reported in the year-ago quarter.
The Zacks Consensus Estimate for fiscal 2021 sales and earnings per share suggests growth of 20.7% and 163%, respectively, from the year-ago period's reported numbers.
In the last reported quarter, the company reported a negative earnings surprise of 45%. However, the bottom line beat the consensus mark by 642.2%, on average, in the trailing four quarters.
The Gap, Inc. Price and EPS Surprise
The Gap, Inc. price-eps-surprise | The Gap, Inc. Quote
Key Factors to Note
Gap has been witnessing supply-chain headwinds, including factory closures and port congestions. These have been leading to product delays, making it difficult for the company to fulfill the strong customer demand.
Management, on its last reported quarter’s earnings call, expected supply-chain issues to persist in the days ahead. As a result, it slashed fiscal 2021 adjusted earnings to $1.25-$1.40, down from $2.10-$2.25 per share mentioned earlier. The company forecast an adjusted operating margin of 5%, down from the 7% mentioned earlier. Gap expected year-over-year sales growth of 20% compared with 30% stated earlier.
The company has been reeling under elevated costs related to higher investments in marketing and technology, as well as a rise in compensation and fulfillment costs. Also, higher inventory levels are expected to have acted as deterrents. On its last reported quarter’s earnings call, management predicted inventory levels in the fiscal fourth quarter to rise year over year in the high-single digits due to COVID-led headwinds and supply-chain disruptions.
However, strength in Old Navy and Athleta brands is likely to have been upsides for Gap. The company’s powerhouse brand Old Navy is expected to have gained from strong demand for the loyalty launch and the introduction of inclusive sizing via the BODEQUALITY launch.
The Athleta brand’s value-driven active and lifestyle categories, increased digital marketing investments, and focus on product strategy have been aiding sales. Athleta is likely to have witnessed strength in the activewear category and the launch of its online fitness and wellness platform, AthletaWell. The launch of Athleta’s Canada online business, and efforts to expand its base internationally with franchise partnerships in Costa Rica and Europe also bode well.
The company’s solid online show is expected to have continued in the quarter under review. Gains from its e-commerce business have been contributing significantly to its Gap, Old Navy and Athleta brands. Its online business has also been benefiting from the company’s dominant omni-channel strength, increased focus on mobile experience and the launch of the native Android app. The fiscal fourth-quarter results are anticipated to reflect gains from improved margins due to lower rent and occupancy costs.
Our proven model does not conclusively predict an earnings beat for Gap this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Gap has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of +2.14%.
Stocks With Favorable Combination
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
DICK’S Sporting Goods DKS currently has an Earnings ESP of +4.86% and a Zacks Rank of 2. The company is likely to register an increase in the bottom line when it reports fourth-quarter fiscal 2021 results. The Zacks Consensus Estimate for quarterly earnings has moved north by 21.1% to $3.38 per share in the past 30 days, suggesting a 39.1% rise from the year-ago quarter’s reported number. You can see the complete list of today’s Zacks #1 Rank stocks here.
DICK’S Sporting’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $3.31 billion, which suggests a rise of 6% from the figure reported in the prior-year quarter. DKS has delivered an earnings beat of 104.2%, on average, in the trailing four quarters.
American Eagle Outfitters AEO currently has an Earnings ESP of +0.69% and a Zacks Rank of 3. The Zacks Consensus Estimate for fourth-quarter fiscal 2021 earnings moved down by 5.3% in the last 30 days to 36 cents per share, indicating a decline of 7.7% from the year-ago quarter's reported number.
However, American Eagle’s top line is expected to have risen year over year. The Zacks Consensus Estimate for AEO’s quarterly revenues is pegged at $1.52 billion, suggesting growth of 17.6% from the figure reported in the prior-year quarter. AEO has delivered an earnings beat of 12.7%, on average, in the trailing four quarters.
Abercrombie & Fitch ANF currently has an Earnings ESP of +2.35% and a Zacks Rank of 3. The Zacks Consensus Estimate for fourth-quarter fiscal 2021 earnings moved down 3.8% to $1.28 per share, indicating a 14.7% decline from the year-ago quarter’s reported number.
However, Abercrombie’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.18 billion, which suggests a rise of 5.4% from the figure reported in the prior-year quarter. ANF has delivered an earnings beat of 112.5%, on average, in the trailing four quarters.
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