The Gap Inc. GPS is likely to face margin pressure in the current quarter as it moves to clear excess inventory, a couple of analysts said Friday.
Gap shares fell more than four percent Friday after the company posted a two percent decline for August same-store sales, versus expectations of a two percent gain.
Goldman Sachs' Lindsay Drucker Mann said the news raise concerns about a reversal of recent comp sales growth. Although Old Navy stores saw a slight gain in same-store sales, Gap stores fell six percent.
Dumping inventory at a discount "could nave negative implications for direct competitors," Mann said, maintaining a Neutral rating and $44 target.
September will see the delivery of the first assortment assembled by a new team of designers. But Mann wants to see consumers' reaction before offering an opinion.
Canaccord's Laura Champine third-quarter gross margin will narrow slightly on inventory clearance. But improved supply chain management techniques may turn the measure around next year, she said.
Champine maintains a Buy rating and $50 target.
Wells Fargo's Paul Lejuez said blue denim dragged down August results and noted that the word for September is non-denim bottoms, as well as black/grey denim, "which performed relatively well in August."
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