Can Gap's Brand Revival & Spin-Off Plans Solve Its Problems?
Zacks Investment Research | Apr 02, 2019 10:18PM ET
The Gap, Inc. (NYSE:GPS) is making several efforts to revive performance across its flagship brand, which remains sluggish for quite a while now. We note that the brand has been witnessing operational headwinds across its business and assortment issues, which are denting its performance. This has also been hurting the company’s comparable sales (comps) and top-line performance.
In fourth-quarter fiscal 2018, comps for the Gap brand fell 5% against flat comps in the year-ago quarter. Also, the company’s total comps inched down 1%, following flat comps in the fiscal third quarter. Prior to this, comps improved for the seventh straight quarter in second-quarter fiscal 2018. In addition, the company’s top line lagged the Zacks Consensus Estimate in the most recent quarter, after surpassing the same in the previous eight quarters.
Apart from these concerns, a drab earnings view for fiscal 2019 has further hurt investors’ sentiments. Despite impressive bottom-line results in the fiscal fourth quarter, Gap’s earnings outlook fell shy of analysts’ expectations. Earnings are envisioned to be $2.40-$2.55, excluding the anticipated costs associated with the restructuring of the Gap brand. This projection is lower than $2.59 earned last fiscal. The Zacks Consensus Estimate for the fiscal year is currently pegged at $2.49.
Consequently, shares of this leading clothing retailer company have lost 19.1% in a year, wider than the Zacks Investment Research
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