Market Overview

The Gap And L Brands Were Adjusted At Cantor

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  • Gap Inc (NYSE: GPS) shares are down 23 percent year-to-date, while L Brands Inc (NYSE: LB) shares have gained 4 percent during the same period.
  • Cantor Fitzgerald's Laura Champine maintained Hold ratings for the companies, while revising their price targets.
  • The target prices have been revised after both the companies reported their same-store sales figures.

Analyst Laura Champine reduced the price target for Gap from $36 to $35, citing “weak fashion at the namesake brand and Banana Republic” continuing to overshadow Old Navy's momentum. “We remain on the sidelines as we do not expect momentum to recover at Gap or BR anytime soon,” she added.

Consolidated same-store sales were down 2 percent in August, in addition to a decline of 2 percent in the prior year. The results were short of both Cantor and consensus estimates of flat same-store sales. Gap global same-store sales was down 8 percent in August, on top of a 6 percent decline in the previous year.

Cantor Fitzgerald noted, “The namesake brand has suffered double-digit SSS declines on a two-year basis in five of seven months so far in FY:15. Banana Republic global was similarly lousy, down 11% on top of -2%. Both brands widely missed consensus expectations of -5% at Gap and -2% at BR.”

“Fashion remains weak in stores, and we do not expect much to change heading into holiday with product already purchased,” Champine wrote.

The analyst raised the price target for L Brands from $83 to $84, after the company reported strong same-store sales for August. Same-store sales grew 6 percent in August, higher than the Cantor estimate of 3 percent and the consensus expectation of 2 percent. This is a “positive sign for the back to school selling season,” Champine said.

What makes L Brands' August performance even more impressive is that 100-200bps of same-store sales growth was pushed into September due the later Labor Day holiday, the Cantor Fitzgerald report stated.

The company’s 6 percent same-store sales growth came on top of the 5 growth recorded in the prior year, marking its strongest showing in FY15 so far. same-store sales growth at both Victoria's Secret and Bath & Body Works were higher than expectations.

Latest Ratings for GPS

DateFirmActionFromTo
Nov 2020JP MorganUpgradesNeutralOverweight
Nov 2020Morgan StanleyMaintainsEqual-Weight
Oct 2020Morgan StanleyMaintainsEqual-Weight

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Posted-In: Cantor Fitzgerald Laura ChampineAnalyst Color Price Target Reiteration Analyst Ratings

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