Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Gap Stock Crashes 20% on Trimmed Outlook, Morgan Stanley Downgrades to Underweight 6 Weeks After Upgrading to EW

Stock Markets May 27, 2022 07:07AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Gap (GPS) Stock Crashes 20% on Trimmed Outlook, Morgan Stanley Downgrades to Underweight 6 Weeks After Upgrading to EW

By Senad Karaahmetovic

Shares of Gap (NYSE:GPS) are down more than 19% in premarket trading Friday after the clothing and accessories retailer trimmed its FY adjusted EPS guidance, missing the consensus estimates.

Gap reported a Q1 loss per share of 44c, while analysts were expecting a loss per share of 14c. Net sales came in at $3.48 billion, above the analysts' expectations of $3.46 billion.

Total comparable sales in Q1 were down 14%, while analysts were expecting a decline of 9.93%. Gap global comparable sales plunged 11%, while analysts were estimating a slip of 3.2%.

Gap reported Old Navy comparable sales declined 22% in the period, compared to the expected drop of 16.8%. Comparable sales at Banana Republic rose 27% in the quarter, beating the expected growth of 11.8%. Athleta comparable sales were down 7%, while analysts were projecting a 10% growth.

The Q1 gross margin stood at 31.5%, compared to the consensus projection of 35.3%.

“We are revising our fiscal 2022 outlook to reflect the impact of certain factors impacting our near-term performance, including execution challenges at Old Navy, an uncertain macro consumer environment, inflationary cost headwinds, and a slowdown in China that is impacting Gap Brand,” said Katrina O’Connell, Executive VP and CFO of Gap.

“We expect our performance to improve modestly in the back half of the year and accelerate as we enter fiscal 2023,” CFO said.

The company expects to shut down around 50 Gap and Banana Republic stores in North America in 2022 as a part of its 350-store closure plan.

Morgan Stanley analyst Kimberly Greenberger downgraded GPS stock to Underweight from Equal Weight with an $8.00 per share price target, down from $13.00. Remember, the analyst upgraded GAP shares in April to EQ after it had downgraded the stock to UW back in January.

“We move back to Underweight, as consistent, protracted misexecution against a likely decelerating macro backdrop & further industry headwinds could pressure earnings lower for longer,” Greenberger said in a client note.

J.P. Morgan analyst Matthew Boss downgraded Gap from Neutral to Underweight with a price target of $9.00 from $11.00.

Credit Suisse analyst Michael Binetti reiterated a Neutral rating and cut the price target to $10.00 per share from $13.00.

“We are disappointed, but not surprised with 1Q results and updated guide. With industry optics suggesting the low income consumer (ON’s core) is under pressure, we don’t expect an easy path to a re-rating for the multiple soon,” the analyst told clients.

Gap Stock Crashes 20% on Trimmed Outlook, Morgan Stanley Downgrades to Underweight 6 Weeks After Upgrading to EW
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email