Analysts At Buckingham Raise Price Target On The Gap, Still Neutral On Shares

Gap Inc GPS delivered a comp beat in June, despite its promotions remaining consistent month/month, Buckingham’s Kelly Halsor said in a report. She reiterated a Neutral rating on the company, while raising the price target from $18 to $21.

Improved June Comps

Gap’s total June sales grew 2 percent to $1.57B, backed by a 2 percent increase in SSS, compared to the expectation of a 5.2 percent decline.

Gap brand comps were down 1 percent, performing better than the estimate of a 3 percent decline. Old Navy comps rose 5 percent, versus expectations of a 5 percent decline, while Banana Republic comps were down 4 percent, compared to an estimated 10 percent decline.

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Limited Upside

“We believe the acceleration in June trends relative to the May/April period has led to modest multiple expansion in retail overall, as investors have stepped back from their worst fears around the health of the consumer,” analyst Kelly Halsor wrote. She added, however, that further EPS upside from here was unlikely.

“In our view, GPS is beholden to volatile swings in mall traffic with no evident tools to point to currently to help fend off share losses,” Halsor mentioned. She stated further that expectations already reflected an improvement in comp trends in the back half of the year, although there was lack of visibility regarding how traffic trends would play out in 2H.

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