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HenryTo
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 Posted: Thu Jan 05, 2006 8:12 am Post subject: Gap (GPS) |
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Ouch - this stock has been one which I have wanted to pick up for awhile, but just haven't pulled the trigger yet. In light of this, I guess (no pun intended) I will just need to wait a little longer:
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Gap Sales Disappoint Wall Street View
Thursday January 5, 8:38 am ET
Gap December Same-Store Sales Fall 9 Percent, a Sharper Drop Than Analysts Expected
SAN FRANCISCO (AP) -- Gap Inc. said Thursday that its December sales dropped 9 percent at stores open at least a year, a much larger decline than Wall Street had predicted for the clothing retailer.
The company, which owns the Gap, Banana Republic and Old Navy chains, attributed the decrease to fewer customers in its stores -- across all three brands.
Analysts surveyed by Thomson Financial expected same-store sales to fall just 3.8 percent.
However, Gap backed its profit guidance of $1.12 to $1.17 per share for the fiscal year ending later this month, saying that trends point to the upper end of this range. Wall Street is pegging the retailer's earnings at $1.15 per share.
The largest drop was at Gap and Old Navy stores in North America, which both posted a decline of 10 percent in December same-store sales. Banana Republic -- which sells higher-priced clothes -- saw a 5 percent decrease in North America.
At Gap International, same-store sales fell 3 percent.
Each segment posted a steeper drop than Wall Street had forecast. Gap noted, however, that it decreased merchandise markdowns during the period, which resulted in slightly higher margins compared with a year earlier.
Total sales in December slid 5 percent to $2.4 billion from $2.6 billion.
For the 11 months ended in December, Gap's same-store sales fell 5 percent, and its total sales dropped 2 percent to $15.1 billion.
Last edited by HenryTo on Fri Aug 21, 2009 11:03 am; edited 1 time in total |
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HenryTo
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| Posted: Sun May 20, 2012 12:40 am Post subject: |
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Morningstar on GPS' efforts to reconnect with its customers that it lost so long ago.
| Quote: | | Plagued by poor merchandising strategies and the failure to connect with its audience over the past few years, Gap GPS was forced to make some changes to its merchandising team and marketing strategy to correct its overall business strategy during 2011. While first-quarter results indicate to us that the changes have started to bear fruit, we caution that one quarter does not make a trend. We would like to see consistent performance across all of Gap's segments to really get excited. The buzz around the merchandise this season (which looks terrific) has rallied investors behind the stock, which has risen about 35% year to date. We take a deep breath and remind ourselves that Gap is a business that has struggled for a long time, trying to reinvent itself, but we are excited to think that it might finally be on a track that is close to the right one. We have updated our model and are maintaining our fair value estimate of $22, but think there might be some upside to our projections if the positive merchandising trends carry over into future quarters. Gap delivered 6% sales growth in the first quarter, with same-store sales up 4%. Three of the four segments reported positive same-store sales growth, with Gap North America increasing 5%, Banana Republic North America rising 5%, Old Navy North America up 4%, and international lagging the group with comps that declined 4%. Gross margins declined 20 basis points to 39.4% as increasing average unit retail prices were offset by increasing average unit costs. This hurt merchandise margins, which contracted 150 basis points, larger than the 120-basis-point leverage Gap was able to achieve in rent and occ upancy costs. Operating expenses were higher by $62 million (to $980 million), with more money spent on marketing and store payroll. We view the marketing spending as imperative to promote the brands. Management raised its full-year guidance from $1.75-$1.80 to $1.78-$1.83, which still sits below our full-year estimate. The full-year plan is to drive modest top-line growth and deliver strong merchandise margins through better product and improved average unit costs. While Gap expects product unit costs to decline in the second half of the year, it anticipates the benefit will be partly offset by reinvestment into new product and changes to the product mix. Additionally, no operating expense leverage is anticipated for the full year as Gap is wisely reinvesting in areas like e-commerce, global IT, and marketing. Overall, this is a step in the right direction for Gap, as it seems that management has taken its long-overdue medicine to fix the patient (realign the business.) Aft er a long string of negative annual comps--seven of the past eight years have generated flat or negative same-store sales--it remains difficult for us to be convinced a turnaround is imminent, but we are cautiously optimistic that this quarter has the potential to be the beginning of a long-term trend if the updated merchandising strategy continues to succeed. |
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HenryTo
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HenryTo
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| Posted: Fri Feb 24, 2012 1:41 pm Post subject: |
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Morningstar on GPS' 4Q earnings.
| Quote: | | Gap GPS reported fourth-quarter earnings per share that were ahead of our and consensus expectations. While the sheer size of the company allows it to throw off a tremendous amount of cash ($800 million in free cash flow for the year), the performance of the stores leaves something to be desired. The new spring merchandise appears to be more in line with consumer demands, but the fourth quarter suffered from weak comps as some less attractive inventory moved through the channel. Three of the four segments at Gap reported negative comps (Banana Republic was the best performer with flat comps), with Gap North America comps down 3%, Old Navy North America comps declining 6%, and international comps falling 8%. We expect to increase our fair value estimate slightly from $20 as we believe there is some upside in profitability once the company realigns itself, but it may take some time until the company can capture a sustained improvement in merchandise and distribution. In the quarter, gross margins contracted 540 basis point s, affected by higher average unit costs that most retailers experienced in the back half of the year. Merchandise margins contracted 500 basis points while rent and occupancy fell 40 basis points. Since gross margins were weak, management tried to compensate by controlling operating expenses and was able to leverage costs by 60 basis points. More important, the company conveyed a targeted plan to improve the business. The high-level strategic plan is focused on reducing the company's dependence on the North American specialty brick-and-mortar business and also expanding the brands internationally. Management has three priorities to help it achieve its $1.75-$1.80 goal in 2012 earnings per share: improving sales and merchandise margins, investing in the business while maintaining discipline, and returning excess cash to shareholders. While the last two are under control of the company, we think the first goal of improving sales and merchandise margins is a wild card, depende nt on the macroeconomic environment, promotional activity across retailers, and cotton costs, especially since the company is still purchasing inputs for the fourth quarter. Gap plans to continue to return cash prudently to shareholders, which we like very much. The board of directors approved a new repurchase authorization for $1 billion. Additionally, Gap is increasing its quarterly dividend by 11%, to $0.125 from $0.1125, implying that it has tripled its dividend since 2005. Both methods of returning capital speak volumes about the prudent leadership of Gap, which reallocates excess cash to shareholders who may be able to deploy it more lucratively. |
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HenryTo
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| Posted: Fri Aug 19, 2011 2:56 pm Post subject: |
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Morningstar on GPS' 2Q earnings:
| Quote: | | Although Gap GPS reiterated its full-year earnings per share forecast following second-quarter results, it is still struggling on several fronts. Like many other firms in the consumer sector, Gap met consensus earnings expectations but countered relatively soft sales by keeping a tight grip on expenses. We don't anticipate a change to our fair value estimate following the earnings announcement, but the firm is clearly in transition and facing significant near-term pressure as it struggles to reconnect with shoppers. Total quarterly revenue ticked up 2% to nearly $3.4 billion, as a 2% drop in comparable-store sales countered gains in online and new international stores. We think a lot could be baked into anticipated sales growth in the back of the year, some of whi ch is likely to materialize through inflation rather than volume, which is somewhat disconcerting. The firm is still struggling to identify with consumers (particularly women) as management bluntly stated that its marketing message was fairly ineffective at driving customer visits during the quarter. Macro and cost headwinds have also hit Gap hard, as the firm is large enough that it is often considered the litmus test for the apparel sector, and GDP growth has slowed in recent quarters (while transportation and input costs have risen). Operating margins contracted more than 200 basis points during the quarter (to 9.9%), as expense management was not enough to offset the drop in merchandise margins. We project an acceleration in margin pressure as the year progresses, somewhat surprising given that some other retailers appear to be having relative success in vendor negotiations and selective pricing gains. The firm repurchased $1.4 billion worth of stock in the first half of the year, providing a $0.03 boost to reported earnings per share, which came in at $0.35. Though the commodity-based cost pressures are most likely temporary in nature, greater-than-expected discounting at the Gap brand reaffirms our stance that it could take several quarters before investors see a consistent string of positive same-store sales growth. We still give the firm a fair amount of credit for its international and e-commerce expansion, which continues to perform fairly well and has several more years of growth potential, which has arguably been overshadowed by weakness in the domestic business. Even with the shares trading at just over 10 times our forward (January 2012) earnings estimate, we would still look for a greater margin of safety before investing. |
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rffrydr
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| Posted: Mon May 23, 2011 12:34 pm Post subject: |
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Gap is old....old enough to be out of fashion and not old enough to be permanently in fashion.
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HenryTo
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| Posted: Sat May 21, 2011 6:38 pm Post subject: |
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Morningstar on Gap's 1Q earnings:
| Quote: | | Although we've suspected for some time that the market was underestimating the sourcing cost pressures that Gap GPS would experience in 2011, we were surprised by the severity of the company's cost outlook for the year. Management anticipates product costs per unit to rise 20% in the back half of 2011 because of elevated cotton prices and Chinese labor costs, doubling its sourcing cost outlook from last quarter and outpacing the low- to mid-teens expectations other apparel retailers have recently cited. Because planned retail price increases will not be sufficient to offset these cost pressures, particularly at Old Navy and o utlet stores, the company slashed its 2011 earnings per share outlook to $1.40-$1.50 from $1.88-$1.93, and we plan to make similar adjustments to our model. Though we view the commodity-based cost pressures to be temporary in nature, greater-than-expected discounting at the Gap brand also reaffirms our stance that the company could struggle to reconnect with consumers, given inconsistent merchandising and a heightened rivalry with fast-fashion retailers. We plan to reassess our long-term assumptions in light of Gap's disappointing first-quarter results, and a modest reduction in our fair value estimate is likely. Total quarterly revenue fell 1% to $3.3 billion, as a 3% decline in comparable sales and the impact of the earthquake and its aftermath in Japan more than offset an 18% increase in online sales and contribution from stores opened during the past 12 months. One-time events notwithstanding, we expect choppy top-line results from the company over the next several months as customers at its value-oriented concepts struggle with macroeconomic headwinds and the Gap brand searches for a new head of adult product design. Still, with selective price increases planned during the next several quarters and 75 stores expected to open this year, we still believe low-single-digit revenue growth is achievable for 2011. Operating margins contracted 250 basis points to 11.7% during the quarter, and margin pressures should become more pronounced as the year progresses, based on management?s commentary. As a result, sourcing cost pressures (coupled with international expansion efforts) should drive operating margins down into the high single digits for 2011. |
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HenryTo
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| Posted: Fri Feb 25, 2011 8:14 pm Post subject: |
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Morningstar on Gap's 4Q earnings:
| Quote: | | After reviewing Gap's GPS fourth-quarter results, we are maintaining our fair value estimate. Despite the weaker-than-expected top line during the quarter, the firm delivered decent operating margins, as gross margin contractions were largely offset by cost savings from operational efficiencies. As a result, quarterly earnings per share of $0.60 came in above management's prior forecast of $0.56-$0.57 and our implied estimate of $0.56. Gap provided a pretty conservative 2011 outlook with earnings per share forecast to be $1.88-$1.93, a 0%-3% increase from the prior year. This is in line with our $1.92 estimate, where we project low-single-digit revenue growth and a roughly 100-basis-point contraction in operating margins because of higher input costs. Total quarterly revenue increased 3.0 % to $4.4 billion, driven almost entirely by international expansions and e-commerce growth of 12% and 24%, respectively. Consolidated comparable-store sales were flat for the quarter, as the 2% comparable sales decline at namesake brand Gap was offset by 1% comp increases at Banana Republic and Old Navy. Gap's top-line miss during the holiday season affirms our view that the firm will deliver choppy results as it struggles to reconnect with consumers. Given Gap's inconsistent performance history and increasing competition from fast-fashion retailers like Forever 21, H&M, and Zara in North America, we project low-single-digit revenue growth in the foreseeable future. Given the weaker top line, the quarterly gross margin contracted 130 basis points because of increased promotional markdowns to clear excess inventory. This was partially offset by benefits from rent and occupancy leverage as well as savings from tight expense controls. As a result, the operating margin was down only 30 basis points to 13.6% during the quarter. In 2011, we anticipate that the operating margin will contract to the low double digits from 13.4% in 2010, largely because of higher sourcing costs and incremental expenses tied to international expansion. |
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HenryTo
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| Posted: Fri Nov 19, 2010 12:39 pm Post subject: |
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Morningstar on Gap's 3Q earnings:
| Quote: | | We are maintaining our fair value estimate after reviewing Gap's GPS third-quarter results. Total revenue increased 1.8% to $3.7 billion, driven almost entirely by international expansions and e-commerce growth. Consolidated comparable-store sales were flat for the quarter, as the 2% comp decline at Old Navy was offset by 1% comp increases at Gap and Banana Republic. The comp decline at Old Navy was attributable to tough comparisons (comps had been up 10% in the third quarter of 2009) and lower selling prices because of increased promotional markdowns to clear excess inventory. Traffic was weak across all three chains, affirming our thesis that it will be tough for the firm to attract postrecession consumers into its stores, given the lack of compelling merchandise. The operating margin contracted 10 basis points to 13.8%, largely because of weaker merchandise margins, partially offset by benefits from rent and occupancy leverage as well as savings from tight expense controls. Heading into the holiday season, Gap's plan to stagger new product flow, with support from varying marketing campaigns (a strategy similar to that employed by Limited Brands LTD with great success), has yielded positive results thus far. In our view, this will probably drive traffic over the next few months if executed well. Nonetheless, given Gap's inconsistent performance history and increasing competition from fast-fashion retailers such as Forever 21, H&M, and Zara in North America, we continue to take a more conservative stance on the firm's domestic business. Overall, we project that Gap will post low-single-digit top-line growth over the next few years. We think operating margins w ill contract modestly to the low double digits in the near term, down from the projected 13% in 2010, largely because of higher sourcing costs and incremental expenses tied to international expansions. |
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HenryTo
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HenryTo
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| Posted: Fri Aug 21, 2009 11:04 am Post subject: |
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Morningstar's earnings notes on GPS:
| Quote: | | Gap's GPS second-quarter results confirm our thesis that while the retailer is struggling to drive sales, it has been successful at driving costs out of the business. However, eventually Gap will have to boost store productivity, because there isn't much more fat to trim. So far, we see little evidence that any of Gap's chains are positioned to pick up the slack of the others. Second-quarter sales declined 7.3% year over year to $3.25 billion, driven by same-store sales declines at all three of Gap's chains. Banana Republic turned in the worst performance, with a same-store sales decline of 15%. The Gap chain performed only moderately better at negative 10%, and Old Navy seems to have pulled out of its nosedive, posting a comparable sales decline of just 4%. All three chains were lapping same-store sales declines in the year-ago quarter. Despite lower sales, the company managed to boost its operating income to $375 million (11.6% of sales) from $373 million (10.7% of sales) in the year-ago period. This was made possible by moderate gross margin expansion (thanks to fewer markdowns) and a $52 million reduction in operating expenses, like corporate overhead. Since the beginning of 2007, the company has cut operating expenses by 15% ($650 million). However, the next year could prove especially challenging, as the company is now running lean and the top line has shown few signs of stabilizing. |
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rffrydr
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| Posted: Tue Feb 27, 2007 7:21 am Post subject: |
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| Quote: | | an illustration of the innovative risks you need to take in our business," said Gap Chairman Bob Fisher |
""The landscape is so competitive that each retailer has to have a clear reason to be (in existence) and Forth & Towne, never had that,"" --Judging by this The Gap isn't the only one grappling for "direction"
http://www.latimes.com/features/lifestyle/la-et-fashion26feb26,1,7056348.story
Even the Oscars rejected the designers, going "heritage" both for a sense of authenticity and rejection of being "branded." The same thing?
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HenryTo
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| Posted: Mon Feb 26, 2007 11:16 pm Post subject: |
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Forth & Towne didn't last long - and the target audience never really represented Gap's core market anyway.
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Gap to Close Forth & Towne Chain
Monday February 26, 6:41 pm ET
By Michael Liedtke, AP Business Writer
Gap to Close Forth & Towne Chain to Focus on More Established Brands
SAN FRANCISCO (AP) -- Gap Inc. is closing the Forth & Towne chain that was supposed to help the struggling retailer sell more clothes to older women, aborting the 18-month expansion so management can concentrate on reviving the company's more established brands.
The decision announced Monday affects all 19 Forth & Towne stores opened since Gap unveiled the concept in West Nyack, N.Y., north of New York City in August 2005. Forth & Towne's other stores are located in Atlanta, Chicago, Houston, Seattle, San Francisco, Los Angeles, San Diego, San Jose and Santa Barbara.
The store closures are expected to be completed by the end of June, jettisoning about 550 jobs. Some of the affected employees may be transferred to one of the San Francisco-based company's other chains -- Gap, Old Navy and Banana Republic.
Signaling that some layoffs are likely, Gap is budgeting $7 million to cover severance payments and other benefits for former Forth & Towne workers, according to a filing with the Securities and Exchange Commission.
Gap hoped to develop Forth & Towne into a specialty channel catering to women older than 35 who grew up in Gap jeans but found themselves sized out in the market in middle age. When it launched Forth & Towne, Gap estimated it only held a 3 percent share of over-35 female market compared to an 8 percent share of women shoppers under 35. Gap had hoped to woo boomers -- who are at the peak of their earnings and spending power -- back with a store that combined the service of a boutique, the broad offerings of a department store -- and a more forgiving fit.
"Forth & Towne was a great test of a promising concept and an illustration of the innovative risks you need to take in our business," said Gap Chairman Bob Fisher. "We made the tough decision to close the brand and focus our efforts on stabilizing the existing businesses."
Fisher has been Gap's interim chief executive officer since last month when the retailer ended the nearly 4 1/2-year rein of Paul Pressler after a dismal holiday shopping season that represented a new low point in a prolonged sales funk.
In a key measure of a retailer's health, Gap's same-store sales fell 7 percent last year, deteriorating from a 5 percent decline in 2005. The closely watched yardstick measures sales at stores open at least a year.
Despite its troubles, Gap intends to continue investing in other promising concepts, including a recently launched online shoe store called Piperlime, company spokesman Greg Rossiter said.
Although abandoning Forth & Towne will drive up Gap's expenses by about $40 million during the first half of this year, industry analysts believe the company will be better off without the potential albatross.
"This brand never gained much traction, suffered from fit, style, and image problems and became a big distraction," Lazard Capital Markets analyst Todd Slater wrote in a Monday research note.
Retail analyst Jennifer Black said the expansion never made much sense, given Gap's troubles connecting with shoppers of all ages. "The landscape is so competitive that each retailer has to have a clear reason to be (in existence) and Forth & Towne, never had that," she said.
Gap shares fell 16 cents Monday to close at $19.65 on the New York Stock Exchange.
Scrapping Forth & Towne also may free up some merchandising talent to help with the turnaround efforts at the Gap and Old Navy chains. Analysts are particularly intrigued with the possibility that Forth & Towne's current president, Gary Muto, might now return to Gap, a chain that he led from August 2002 through September 2004.
Gap's sales improved during most of Muto's tenure at the chain. "If he were to return to the Gap brand, (it) would be a positive influence on the division," Stifel, Nicolaus & Co. analyst Richard Jaffe wrote in a Monday research note.
If Muto were to come back to the Gap, it probably wouldn't be as president because the company just promoted Marka Hansen -- the former head of Banana Republic -- to that job earlier this month.
Muto also once ran Banana Republic, making him a possible candidate to return to an upscale chain that has emerged as the best-performing of Gap's three brands.
Gap and Muto haven't agreed on a new assignment yet, Rossiter said. The company is expected to discuss the ramifications of the Forth & Towne closure Thursday when it reviews its fourth-quarter results in a conference call with analysts.
Forth & Towne's closure underscores the challenges facing clothing retailers catering to the graying baby-boom generation. Many merchants like Gap recently have been intensifying their focus on the niche, inspired by Chico's FAS Inc.'s successful formula for targeting boomers.
But now even Chico's is hitting a rough patch, having registered a 2.2 percent gain last fiscal year in its same-store sales. Chico's slowing same-store sales growth followed double-digit increases in the previous two years.
Associated Press Business Writer Anne D'Innocenzio in New York contributed to this story. |
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HenryTo
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| Posted: Thu Feb 23, 2006 11:52 pm Post subject: Gap posts lower Q4 earnings; shares slip |
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Stock down nearly 6% in after-hours trading earlier tonight. Will continue to wait as our mid-cycle slowdown scenario is still on, I believe:
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Gap posts lower Q4 earnings; shares slip
Thursday February 23, 7:52 pm ET
By Chelsea Emery
NEW YORK (Reuters) - Gap Inc (NYSE:GPS - News) on Thursday reported fourth-quarter earnings that sagged 11 percent on lower sales at its Old Navy, Banana Republic and namesake Gap stores, and the company gave a full-year forecast that was below Wall Street expectations.
Shares fell more than 4 percent in after-hours trading.
"The issue is not the quarter, which was in line with expectations, but their guarded outlook for 2006," said Richard Jaffe, an analyst with Stifel Nicolaus. "The business is struggling and it continues to struggle. Traffic is falling..."
The San Francisco-based apparel retailer said net earnings fell to $337 million, or 39 cents per share in the quarter, from $378 million, or 40 cents per share, in the year-ago period. For fiscal year 2005, the company earned $1.24 a share, up from $1.21 a share a year ago.
Results were in line with the average forecast of analysts surveyed by Reuters Estimates.
Looking ahead, the company gave a full-year earnings forecast of $1.23 to $1.27 per share. The outlook includes an estimated charge of about 3 cents per share related to stock option expensing.
"We are adopting a cautious outlook for 2006," Byron Pollitt, Gap Inc.'s chief financial officer, said in a conference call.
He cited "uncertainty regarding the timing of our turnaround, month-to-date February traffic that is down 13 percent and management's expectation that total comp store sales will remain negative in the first half and turn modestly positive in the second half."
Analysts on average expected Gap Inc. to earn $1.35 per share for the year, according to Reuters Estimates.
"This is a business in the middle of a turnaround," said Joseph Beaulieu, an analyst with investment research company Morningstar. "It's no surprise they had pretty miserable comps for the fourth quarter."
Fourth-quarter net sales slipped 2 percent to $4.82 billion. Comparable store sales decreased 6 percent, compared with a decrease of 3 percent for the same period last year.
The company's main business units also showed declines. Sales at North American Banana Republic stores open at least a year were down 5 percent after dropping 7 percent in the third quarter and sliding 1 percent in the year-ago fourth quarter.
The company in January surprised Wall Street with a 1 percent rise in same-store sales. It was the first time since October 2004 that Gap had posted higher same-store sales, a key retail measure.
The company also said it plans to boost its cash dividend by 78 percent, to 32 cents per share, in 2006 and its board has authorized an additional $500 million for its share repurchase program.
Morningstar's Beaulieu applauded the move.
"I'm pleased to see the company continue to buy back shares and significantly boost dividends," he said. "This is a company that has recognized that it's not in a growth phase any more and they're returning cash to shareholders in significant quantities."
Gap Inc. president and chief executive Paul Pressler said in a statement: "This announcement reflects our confidence in the company's ability to continue generating strong cash flow."
The company has decided to open 10 more Forth & Towne stores in 2006, its newest chain known for clothing for women 35 and over.
"What we're learning so far is that customers who have come in and bought (items) are really, really excited about the concept," a company representative said on the conference call.
Gap shares slipped to $18.30 in extended trading on the Inet trading system after closing at $19.10 on the New York Stock Exchange.
Shares have dropped more than 7 percent over the past year and the company is selling for 14 times next year's earnings, compared with competitor Limited Brands (NYSE:LTD - News) which is selling for 15 times earnings and Chico's FAS Inc. (NYSE:CHS - News), which is selling for 36 times earnings. |
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nodoodahs
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| Posted: Thu Jan 05, 2006 1:16 pm Post subject: |
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I "guess" the boys at GES might be calling a top for us. Pun intended.
Four different officers selling a combined $60 million or so worth of stock. Could be just tax sales (ahem! $60 million) since it all took place in December.
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