Gap (GPS) Revives: Old Navy Drives June Comps, Stock Rises

Shares of specialty-retailer The Gap, Inc. (NYSE:GPS) jumped 4% in the after-market trading session yesterday. And why not? This Zacks Rank #5 (Strong Sell) stock, which has been in the red for a while now, finally offered investors a reason to cheer when it posted positive June comparable store sales (comps), finally breaking its fourteen-month long record of negative comps.

June Sales

Coming to numbers, Gap’s net sales for Jun 2016 rose 2% to $1.57 billion from $1.54 billion recorded in the same period last year. Also, the company’s comps for the month advanced 2%, representing an improvement from a 1% dip noted in the year-ago period.

As predicted by the company, the Memorial Day shift from May to June was one of the reasons that drove sales and comps for the five week period ended Jul 2, 2016. This shift led to enhanced consumer traffic, resulting in higher comps, which also fared better than analysts’ expectations.

While comps at the company’s Banana Republic and namesake brands remained soft, Old Navy, which was once the knight in shining armor for Gap, proved to be the saving grace again. This again, was attributable to greater traffic trends, thanks to the holiday week.

Evidently, comps at Gap Global slipped 1%, after last year’s 5% decline. Further, performance at Banana Republic Global continued to deteriorate, as the brand recorded a 4% drop, against a 1% rise last year. Old Navy on the other hand, saw its comps jump 5%, compared with a 1% increase witnessed last year.

Gap has been struggling with waning top-line results, owing to the ever-changing fashion trends, slow traffic and currency headwinds. However, management recently chalked out a fresh strategic plan to keep track of the accelerated pace of change in the apparel industry. The company intends to speed up its transformation plan by bringing meaningful changes to its product portfolio and operating capabilities worldwide.

In fact, after the June sales results, some analysts believe that Gap’s turnaround efforts are finally starting to bear fruit. Let’s see if the company can keep this optimism alive in the future.

Stocks to Consider

Some better-ranked stocks in the same industry include The Children's Place, Inc. (NASDAQ:PLCE) and Christopher & Banks Corporation (NYSE:CBK) , each with a Zacks Rank #1 (Strong Buy), and American Eagle Outfitters, Inc. (NYSE:AEO) , with a Zacks Rank #2 (Buy).

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