Analyst: Gap Inc. New Assortment Expected By Spring '16

Gap Inc.'s

effort to spiff up its products is the top priority for newly installed Chief Executive Arthur Peck, an analyst said Friday. Incremental improvements are expected for the 2015 holiday season, "but the new team's full assortment won't hit stores until Spring 2016," according to Stifel's Richard Jaffee. Jaffee nonetheless reiterated a Buy rating on Gap and $48 target. The shares are up about 3 percent this year, roughly on pace with the S&P 500, and changed hands recently at $43.40, up $0.63 cents. Gap fired its creative director Rebekka Bay in late January and last month named Wendi Goldman vice president for product design. Peck took over as CEO Feb. 1, and told investors last month that the company's women's business has "an aesthetic issue" which it's "working on today with urgency." Jaffe, who met with Gap management Thursday, said merchandise at its Gap unit "needs to be more consistent from an aesthetic, quality and fit standpoint." The Gap unit has been in a funk lately, posting a 5 percent decline in same-store sales during 2014, versus a flat rate at its Bananna Republic chain and 5 percent growth at its Old Navy unit. Given weakness in the Gap unit and recent management changes "the investment has become more speculative and longer term," Jaffee said. Jaffe is a bit of an outlier in his favorable appraisal of Gap. Among 35 analysts following the company, 22 maintain Hold ratings, nine are at Buy and one at Overweight, while three are at Underweight or Sell. The analysts maintain an average target price of $43.48.