Gap (GPS) Posts Solid Holiday & December Comps, Stock Up

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The Gap Inc’s GPS strategies for the busiest selling season of the year seems to have paid off, as evident from the company’s impressive comparable-store sales (comps) and sales numbers for the holiday season, comprising the months of November and December (nine weeks ended Dec 31, 2017). Comps rose 2% from the year-ago level for the 2016 holiday season. Moreover, net sales for the two months increased 1%.

Comps for the holiday season benefited from favorable customer response for the Gap and Old Navy brands. While early November results were dampened by soft traffic at stores and malls, the pace picked up as is evident from the company's solid sales numbers for December..

Consequently, the company’s shares rallied nearly 8.6% in the after-hours trading session yesterday. However, the company’s stock has fallen significantly in the past one year. Gap’s stock declined about 13.1% in 2016, significantly underperforming the Zacks categorized Retail–Wholesale sector’s growth of 8% during the same period.


 

December Comps

Gap posted a 4% increase in comps for December, compared with a 5% decline in the same period of 2015. Net sales for the five-weeks ended Dec 31, 2016 came in at $2.07 billion, up 3% from $2.01 billion for the five-weeks ended Jan 2, 2016.

Brand-wise, the company’s comps improved at both the Gap and Old Navy brands, while the performance of Banana Republic was slightly lackluster.

Comps at Gap Global inched up 1%, following the 2% dip recorded in the year-ago period. Further, Old Navy reported positive results with comps surging 12%, reflecting a marked improvement over the 7% decline in the comparable month of 2015. However, performance at Banana Republic Global continued to be weak with the brand recording a 7% decline, narrower than the 9% fall witnessed in Dec 2015.

Apart from Gap, Costco Wholesale Corporation COST and Zumiez Inc. ZUMZ also posted comps growth of 3% and 3.4%, respectively, for December. However, comps for Victoria’s Secret owner, L Brands Inc. LB were down 1% for the month.

November Comps

Coming back to Gap, the company’s comps for November dipped 1%, much better than the 8% fall recorded in Nov 2015. Net sales of $1.53 billion were down 2.5% year over year. Results gained largely from positive customer response for the Banana Republic product assortments. However, comps for November were hurt by the campus fire that broke out in its distribution center in Fishkill, NY in August.

Fiscal 2016 Guidance

Based on the strong holiday season performance, the company now projects earnings for fiscal 2016 to be slightly above the high end of its previous guidance of $1.87−$1.92 per share.

Gap, which is scheduled to release January sales results on Feb 6, 2017, currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Zumiez Inc. (ZUMZ): Free Stock Analysis Report
 
Gap, Inc. (The) (GPS): Free Stock Analysis Report
 
Costco Wholesale Corporation (COST): Free Stock Analysis Report
 
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