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Why Wall Street Is Talking About The Gap


Gap Inc (NYSE: GPS) hosted a sell-side Analyst Meeting in New York City to introduce new CEO Art Peck and was attended by CFO Sabrina Simmons. The company highlighted its plans to put the flagship Gap brand back on track.

Barclays analysts maintained an Overweight rating on the company with a price target $50. "Product needs to be more consistent and Old Navy's recent success is a good example of what the company can achieve by embracing changes made over the last few years," the analysts said.

For the flagship brand, improvement is likely to be seen first in the knits category, and subsequently in the denim category. The more difficult categories of outerwear, sweaters, and wovens are likely to follow suit in time.

"We came away from the meeting impressed by Mr. Peck and are encouraged that the company remains on the correct path (albeit delayed)," the analysts wrote, while adding, "We expect Gap brand to show minimal improvement this summer, with further improvement in fall and continuing into winter. However, the meaningful inflection point for the brand appears more of a 2016 story."

In a separate report, BMO Capital Markets analysts maintained a Market Perform rating on the company, with a $35 price target. Although the analysts were impressed by the new CEO, they expect 2015 to be a "transition year" for the company. The earliest that one can expect any major changes to the merchandise would be in the holiday season, "with a full reflection under the new team not slated to hit until spring 2016."

The analysts also highlighted that it will "ultimately take time to redefine the brand in the mind of consumers and win back mindshare."

Topeka Capital Markets analysts added, "Already a fan, to us the meeting brought even greater focus to his broad experience at GPS, the qualities of his new team, his clarity on how to obtain better results and urgency in doing so." The analysts reiterated their Buy rating and price target of $50.

The upturn boils down to turning around the women's category, a report by Oppenheimer noted. "Gap playing catch-up with supply chain initiatives and product issues (lack of consistency/fit)," the analysts said, while highlighting that the company believes it does not require a fashion cycle to get back on track. Oppenheimer, which has a Perform rating and $39 price target for Gap, reduced its EPS estimate for 2015 from $2.95 to $2.82.

Latest Ratings for GPS

Mar 2021Morgan StanleyMaintainsEqual-Weight
Feb 2021Morgan StanleyMaintainsEqual-Weight
Nov 2020Credit SuisseMaintainsUnderperform

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Posted-In: Barclays BMO Capital Markets Oppenheimer Topeka Capital MarketsAnalyst Color Reiteration Analyst Ratings

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