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Gap shares up after Tuesday selloff

The Associated Press

Gap Inc.'s shares jumped Wednesday as investors saw a good chance to buy up stock following the previous day's selloff.

THE SPARK: The retailer's stock suffered an unexplained decline of more than 10 percent Tuesday. Some investors saw a buying opportunity.

Gap declined to comment on its stock movement.

THE BIG PICTURE: Gap, which operates Old Navy, Banana Republic, Piperlime, Athleta and its namesake brand, appears to be on the right track lately after replacing management, improving its products and amping up its marketing.

The San Francisco company reported in mid-December that its third-quarter net income beat market expectations on strong sales at Banana Republic, Old Navy and Gap. It also raised its outlook for the year. Following that, Gap reported that a key sales trend improved in November but fell just short of analyst estimates.

Gap's drop on Tuesday, however, appeared to have no clear cause.

THE ANALYSIS: Caris & Co. analyst Dorothy Lakner said that it was a very sharp decline for what has been a "rock-solid performer" this year that was based on a lack of any real news.

Lakner did say that perhaps the company's failure to bump up quarterly dividend payments or issue a special dividend to take advantage of current low tax rates like its competitors could have caused some disappointment. However, the company has never indicated that it would consider such a move.

The analyst remained bullish on Gap for the key holiday shopping season. She said that the company has stronger product assortments for the holiday season than last year, as well-controlled inventories and more spending on marketing.

"We continue to think there' much to be positive about at (Gap) and way too soon to dump coal in its stocking," Lakner said in her research note.

The analyst reiterated a "Buy" rating on its shares.

SHARE ACTION: Gap's shares gained 65 cents, roughly 2 percent, to $31.59 by mid-afternoon. Its shares fell from an opening price of $34.56 Tuesday to a closing price of $30.94. Its shares remain at the high end of their 52-week trading range of $17.71 to $37.85.