Market Overview

Analysts See Q3 Margin Pressure At The Gap Inc.


The Gap Inc. (NYSE: 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."

Latest Ratings for GPS

Nov 2020Credit SuisseMaintainsUnderperform
Nov 2020B of A SecuritiesMaintainsNeutral
Nov 2020CitigroupDowngradesBuyNeutral

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