Why Did Gap Stock Tank 18% on Friday?

Shares of Gap Inc. (NYSE: GPS) tanked 18% on Friday after the global apparel retail company lowered revenue guidance for Old Navy business and announced the exit of CEO Nancy Green.

At present, Gap expects Old Navy’s first quarter fiscal 2022 net sales to decline by low to mid-teens percentage year-over-year, compared to the prior guidance of mid to high-single digit fall.

The company has cited “macro-economic dynamics as well as the execution challenges” to be the reason behind this cut. In its last quarterly report, the company said that the business was being impacted by the supply chain disruptions, which still continue to exist.

Gap is scheduled to report the first-quarter earnings on May 26, 2022.

Meanwhile, Gap has announced sudden exit plans of Old Navy President and CEO Nancy Green. The company is looking for an eligible candidate. Until then, Gap’s CEO Sonia Syngal will lead the team.

Syngal said, “As we look to seize Old Navy’s potential, particularly amidst the macro-economic dynamics facing our industry, we believe now is the right time to bring in a new leader with the operational rigor and creative vision to execute on the brand’s unique value proposition.”

Analyst’s Take

Following the news, Bank of America Securities analyst Lorraine Hutchinson maintained a Sell rating on Gap and lowered the price target to $12 from $14. The new price target implies 2.4% upside potential from current levels.

Hutchinson opines that at the time when clients were looking for dresses and fashion tops as workplaces were beginning to open, the company kept focusing on fleece, active and sleepwear. Also, given the current supply chain environment, the analyst thinks it will be difficult to “realign the assortment and for some pockets of markdown liability to continue through 1H.”

Based on two Buys, nine Holds and three Sells, the stock has a Hold consensus rating. Gap’s average price target of $13.75 implies 17.3% upside potential from current levels. Shares have lost 64.1% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Gap’s performance this quarter.

According to the tool, in the first quarter, gap.com is estimated to witness a 44.1% sequential fall in global unique visits. 

Conclusion

Though the company’s two years of restructuring helped in strengthening the core business, global supply chain issues and inflationary environment are likely to weigh on its performance.

Further, with help of our Website Traffic Tool we can track user visits to the Gap website to gain a better idea of the company’s performance ahead of its fiscal Q1 results. Notably, the tool has revealed negative patterns on the website, which is likely to caution investors.

Learn more about the Website Traffic tool in this video by Youtube sensation Tom Nash. 

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