Gap Posts Positive May Comps - Analyst Blog

Gap Inc. GPS reported comparable-store sales (comps) increase of 1% for the 4 weeks ended May 31, 2014 compared with 7% growth registered for the 4 weeks ended Jun 1, 2013, driven by strong results at its Banana Republic and Old Navy stores. Moreover, net sales in May totaled $1.27 billion, up 4% compared with the prior-year period sales of $1.22 billion.

Global brand-wise, performance at the company's namesake brand was disappointing while the Banana Republic and Old Nay brands delivered positive comps. Old Navy Global's comps rose 2% versus a 9% increase in May 2013, while comps at Banana Republic Global grew 3%, as against flat comps in the year-ago period. Meanwhile, comps at Gap Global were down 3% compared with an increase of 8% registered in the prior-year period.

Last month, the company reported its financial results for the first quarter of fiscal 2014, which reflected a drastic fall from the prior year due to higher cost of sales, occupancy expenses and unfavorable foreign currency translations. The company's quarterly earnings came in at 58 cents per share, down 18.3% from the year-ago comparable quarter earnings of 71 cents per share. However, it came a penny ahead of the Zacks Consensus Estimate of 57 cents per share.

Net sales inched up 1.2% to $1,774 million owing to the company's strategic initiatives, including enhancement of its omni-channel capabilities, approach to global growth and effective inventory management. However, these positive factors were counterbalanced by the severe winter weather conditions in the beginning of the quarter, slow start of the spring selling season and unfavorable foreign exchange rates. The top-line was marginally below the Zacks Consensus Estimate of $1,779 million.

First quarter comps inched down 1% as against a 2% rise registered in the year-ago quarter. Global brand-wise, comps at Gap Global witnessed a 5% fall versus an increase of 3% in the prior-year period. Banana Republic Global's comps for the quarter declined 1% as against flat comps last year. Moreover, comps at the company's Old Navy Global stores inched up 1% compared with a 3% rise in the year-ago quarter.

Recently, other retailers including Zumiez Inc. ZUMZ, Rite Aid Corp. RAD and Costco Wholesale Corp. COST – reported comps increase of 3.6%, 3.5% and 6.0%, respectively for the month of May.

This Zacks Rank #3 (Hold) company is scheduled to release its sales results for June on July 10, 2014.

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