Things You Must Know Before Gap (GPS) Reports Q4 Earnings

The Gap, Inc. (NYSE:GPS) is scheduled to report fourth-quarter fiscal 2019 numbers on Mar 12, after market close. In the last reported quarter, the company delivered a positive earnings surprise of 3.9%. Moreover, the bottom line surpassed the consensus estimate by 1.7%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fourth-quarter earnings has moved north by a penny to 41 cents in the past 30 days. However, this suggests a decline of 43.1% from the year-ago quarter’s reported figure. For revenues, the consensus mark is pegged at $4,517 million, indicating a decrease of 2.3% from the figure reported in the year-ago quarter.

Key Factors to Note

The company has been grappling with soft comparable store sales (comps) and weak margins for a while now. Its comps mainly reflect soft traffic trends across all brands as well as a decline in core brands. In the last earnings call, management had expected troubles at its brands and soft traffic to continue throughout the fiscal fourth quarter, which should get reflected in soft comps and top-line performance.

Further, it has been continuing to witness margin declines on softness in Old Navy as well as higher rent & occupancy, and SG&A expenses. Consequently, Gap anticipates witnessing gross margin deleverage in fiscal 2019, which is likely to be almost in line with the level witnessed in the first nine months of fiscal 2019. This indicates that the company is likely to have witnessed a soft gross margin for the fiscal fourth quarter as well.

However, Gap’s omni-channel capabilities, including e-commerce and store expansion, are commendable. The company has expanded its online presence across all brands. Notably, its online division is one of the most profitable segments.

Further, the company’s recent decisions, including the revocation of its planned Old Navy spin-off into a separate entity, are expected to have driven its performance.

Zacks Model

Our proven model doesn’t conclusively predict an earnings beat for Gap this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Gap carries a Zacks Rank #3 and has an Earnings ESP of -0.56%.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Rite Aid Corporation (NYSE:RAD) currently has an Earnings ESP of +33.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Casey's General Stores, Inc. (NASDAQ:CASY) has an Earnings ESP of +3.45% and a Zacks Rank #3 at present.

The Children's Place, Inc. (NASDAQ:PLCE) currently has an Earnings ESP of +1.16% and a Zacks Rank #3.

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