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Gap Inc (GAP)
NYSE:GAP
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Gap Inc
(NYSE:GAP)71Outperform
Positive Factors
Earnings Performance
Gap delivered EPS ~24% ahead of consensus with ~in-line sales, gross margin upside, and lower SG&A as brand reinvigoration and organizational efficiency efforts continued to progress.
Revenue Growth
CEO Dickson characterized the company at an inflection point moving to 'continuous improvement' from 'fixing fundamentals' following 4 straight quarters of revenue growth and 7 consecutive quarters of market share expansion.
Negative Factors
Operational Challenges
Gap resumes the challenge of operating a collection of varying brands with a vast store fleet, and is expected to remain a revenue shrinker facing external pressures.
Gap Inc (GAP) vs. S&P 500 (SPY)
Market Cap
$7.58B
Dividend Yield2.99%
Average Volume (3M)5.17M
Price to Earnings (P/E)9.3
Beta (1Y)1.58
Revenue Growth2.70%
EPS Growth1900.36%
CountryUS
Employees85,000
SectorConsumer Cyclical
Sector Strength53
IndustryRetail - Discretionary
Share Statistics
EPS (TTM)2.15
Shares Outstanding377,121,860
10 Day Avg. Volume6,765,641
30 Day Avg. Volume5,165,032
Financial Highlights & Ratios
PEG Ratio0.00491
Price to Book (P/B)N/A
Price to Sales (P/S)0.53
Price to Cash Flow (P/CF)N/A
P/FCF Ratio115.30
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$28.63Price Target Upside44.30% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering8
Gap Inc Business Overview & Revenue Model
Company DescriptionGap Inc. is a leading global retailer offering clothing, accessories, and personal care products for men, women, and children. Founded in 1969 and headquartered in San Francisco, California, the company operates a diverse portfolio of brands, including Gap, Old Navy, Banana Republic, Athleta, and Intermix. With a focus on delivering modern, stylish, and affordable apparel, Gap Inc. serves customers through a combination of company-operated stores, franchise stores, and e-commerce websites across numerous international markets.
How the Company Makes MoneyGap Inc. generates revenue primarily through the sale of apparel, accessories, and personal care products under its various brand names. Its business model is centered around direct-to-consumer sales via both physical retail locations and online platforms. The company's key revenue streams include sales from its owned retail stores, e-commerce operations, and franchised locations. Additionally, Gap Inc. benefits from strategic partnerships and collaborations that expand its market reach and appeal, as well as its loyalty programs that enhance customer engagement and retention. Seasonal promotions, marketing campaigns, and a focus on trend-responsive product lines also contribute significantly to its earnings.
Gap Inc Financial Statement Overview
Summary
Gap Inc. shows solid financial performance with strong profitability and healthy cash flow metrics. The company maintains a balanced yet leveraged balance sheet. While current performance is positive, historical volatility and high liabilities could pose challenges. Overall, Gap Inc. is positioned well in the retail sector but should monitor financial leverage and continue focusing on operational efficiencies.Income Statement
Gap Inc. demonstrates strong profitability with a Gross Profit Margin of 41.2% and a Net Profit Margin of 5.4% for TTM (Trailing-Twelve-Months). The revenue growth rate from the previous year is 2.3%, indicating a modest recovery trajectory. Additionally, the EBIT Margin stands at 7.1%, and the EBITDA Margin is at 11.0%, reflecting operational efficiency. However, fluctuations in past revenue and profit levels suggest potential volatility.78
Positive
Balance Sheet
The company's Debt-to-Equity Ratio is 1.74, indicating moderate leverage. Return on Equity (ROE) is 26.3%, showcasing strong shareholder returns. The Equity Ratio is 26.5%, denoting a balanced capital structure. Despite these strengths, relatively high total liabilities indicate potential financial risk.65
Positive
Cash Flow
Gap Inc. demonstrates robust cash flow generation, with an Operating Cash Flow to Net Income Ratio of 1.91 and a Free Cash Flow to Net Income Ratio of 1.35. Free Cash Flow growth is stable, highlighting effective cash management. Nonetheless, significant capital expenditures could impact future liquidity.72
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 15.23B | 14.89B | 15.62B | 16.67B | 13.80B | 16.38B | Gross Profit |
| 6.28B | 5.78B | 5.36B | 6.64B | 4.71B | 6.13B | EBIT |
| 1.08B | 622.00M | -69.00M | 1.14B | -862.00M | 574.00M | EBITDA |
| 1.67B | 1.17B | 489.43M | 994.00M | -403.00M | 1.16B | Net Income Common Stockholders |
| 823.00M | 502.00M | -202.00M | 256.00M | -665.00M | 351.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 2.22B | 1.87B | 1.22B | 877.00M | 2.40B | 1.65B | Total Assets |
| 11.85B | 11.04B | 11.39B | 12.76B | 13.77B | 13.68B | Total Debt |
| 5.47B | 5.44B | 6.02B | 6.25B | 7.66B | 7.68B | Net Debt |
| 3.50B | 3.57B | 4.80B | 5.37B | 5.68B | 6.31B | Total Liabilities |
| 8.72B | 8.45B | 9.15B | 10.04B | 11.15B | 10.36B | Stockholders Equity |
| 3.13B | 2.60B | 2.23B | 2.72B | 2.61B | 3.32B |
| Cash Flow | Free Cash Flow | ||||
| 1.11B | 1.11B | -78.00M | 115.00M | -155.00M | 366.00M | Operating Cash Flow |
| 1.57B | 1.53B | 607.00M | 809.00M | 237.00M | 1.41B | Investing Cash Flow |
| -707.00M | -334.00M | -227.00M | -446.00M | -510.00M | -894.00M | Financing Cash Flow |
| -244.00M | -567.00M | 6.00M | -1.47B | 895.00M | -560.00M |
Gap Inc Technical Analysis
Negative
19.84
Price Trends
23.28
Negative
22.98
Negative
22.69
Negative
Market Momentum
-0.67
Positive
30.13
Neutral
15.62
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GAP, the sentiment is Negative. The current price of 19.84 is below the 20-day moving average (MA) of 22.40, below the 50-day MA of 23.28, and below the 200-day MA of 22.69, indicating a bearish trend. The MACD of -0.67 indicates Positive momentum. The RSI at 30.13 is Neutral, neither overbought nor oversold. The STOCH value of 15.62 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GAP.
Gap Inc Risk Analysis
Gap Inc disclosed 30 risk factors in its most recent earnings report. Gap Inc reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Gap Inc Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $4.84B | 8.64 | 50.86% | ― | 19.59% | 154.53% | |
80 Outperform | $5.24B | 13.30 | 14.02% | ― | 7.71% | 40.01% | |
79 Outperform | $4.99B | 14.97 | 7.53% | 0.15% | ― | ― | |
71 Outperform | $7.58B | 9.34 | 26.25% | 2.99% | 2.70% | 1900.36% | |
69 Neutral | $2.30B | 10.27 | 13.25% | 4.17% | 6.38% | 6.08% | |
67 Neutral | $4.00B | 13.94 | 29.58% | 3.13% | 3.57% | 120.60% | |
60 Neutral | $13.01B | 10.45 | 0.79% | 3.53% | 1.60% | -22.47% |
* Consumer Cyclical Sector Average
Performance Comparison
GAP
Gap Inc
19.84
1.28
6.90%
ANF
Abercrombie Fitch
87.23
-47.76
-35.38%
AEO
American Eagle
12.12
-10.75
-47.00%
JWN
Nordstrom
24.36
7.45
44.06%
URBN
Urban Outfitters
57.34
15.28
36.33%
LB
LandBridge Company LLC Class A
65.50
42.57
185.65%
Gap Inc Earnings Call Summary
Earnings Call Date: Nov 21, 2024 | % Change Since: -9.41% | Next Earnings Date: Mar 6, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong quarter for Gap Inc. with record operating margins, growth in net sales, and significant market share gains across its brands. While weather-related challenges and specific brand segments like Banana Republic's women's segment faced difficulties, the overall business showed resilience and progress towards strategic goals.Highlights
Record Operating Margin
Gap Inc. achieved the highest Q3 operating margin in seven years at 9.3%, representing an increase of 270 basis points versus last year's reported operating margin.
Continued Sales Growth and Market Share Gains
Net sales grew for the fourth consecutive quarter by 2%, with market share gains in all brands, marking the seventh consecutive quarter of gains.
Improved Earnings Per Share
Earnings per share increased by 24% to $0.72 compared to the third quarter of last year.
Athleta Returns to Growth
Athleta reported a 5% increase in comparable sales, marking a significant turnaround for the brand.
Strong Cash Position
Gap Inc. ended the quarter with a cash balance of $2.2 billion, an increase of 64% from last year, and generated $540 million in free cash flow year-to-date.
Gross Margin Expansion
Gross margin expanded by 140 basis points to 42.7%, driven by better inventory management and reduced promotions.
Positive Performance Across Brands
Gap brand comps were up 3%, Old Navy maintained flat comps with market share gains, and Athleta turned positive with a 5% comp increase.
Lowlights
Weather-Related Challenges
Unseasonably warm weather and hurricanes negatively impacted Q3 net sales growth by approximately one percentage point, particularly affecting the weather-sensitive kids and baby segment.
Banana Republic Women's Segment Weakness
Banana Republic comps were down 1%, with ongoing challenges in the women's segment despite some pockets of strength.
Company Guidance
During Gap Inc.'s third quarter 2024 earnings call, the company reported a 2% increase in net sales and a 1% rise in comparable sales, marking the fourth consecutive quarter of sales growth and the seventh consecutive quarter of market share gains. The company expanded its gross margin by 140 basis points and achieved an operating margin of 9.3%, the highest for a third quarter in seven years, reflecting a 270 basis point increase from the previous year. Earnings per share (EPS) rose by 24% to $0.72, and inventory levels were down 2% year-over-year. Gap Inc. ended the quarter with a strong cash balance of approximately $2.2 billion and generated $540 million in free cash flow year-to-date. The company raised its full-year outlook for sales, gross margin, and operating income growth, projecting a net sales increase of 1.5% to 2% for fiscal year 2024, excluding the impact of a 53rd week.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.