Gap, Old Navy's Momentum Looks To Have Continued This Summer

Investors are likely to be pleased with the July monthly sales results from Gap Inc GPS, BlueFin’s Rebecca Duval said, which are scheduled to be reported August 8 and should drive the stock higher.

Concerns Played Out

Following concerns regarding a slowdown at Old Navy in 2015, Duval mentioned that the concerns have played out since then and the stock declined 50 percent since 2015 to bottom in May.

However, the most recent BlueFin update on Gap on July 7 noted incremental improvements in both traffic and sales at Gap and Old Navy.

Improving Trends

The company did report better-than-expected June sales comps, with Old Navy reporting an increase of 5 percent and a decline of 1 percent at Gap. The total company saw growth of 2 percent.

Related Link: Wolfe Research Upgrades Gap To Outperform

The stock has traded up 19 percent since the July 7 update, Duval noted.

“Based on our most recent channel checks, we think some of the June momentum carried into July especially at Old Navy and Gap which we think could once again top whisper sales comp’s of flat to down 1 percent,” the analyst said.

2H16 Outlook

While Old Navy has been successfully capturing the early back-to-school sales, Duval believes that if this trend continues, it would benefit the company in 2H16, when year-on-year sales comps become much easier.

According to the BlueFin report, “As for the Gap brand, they have made significant fundamental changes in their business that should be very apparent in the 2H:16. This includes a newly implemented test and react strategy to their buying.”

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