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Author: Alan LittleDate: 2021-03-08

Gap (GPS) jumps 7.60% on double-digit growth forecast for 2021

Gap (GPS) published a mixed Q4 reportbut its shares closed Friday’s session 7.60% higher after J.P. Morgan listed “five key catalysts” for the clothing retail company in the months ahead. 


Late on Thursday, Gap came in with $0.61 earnings per share for the latest threemonth period, which was 42 cents up on the Wall Street consensus. 


However, revenues fell from $4.7bn to $4.4bn year over year and were $300m shy of pre-report estimates.  


Gap said that this decline was partly attributed to “Covid-mandated store closures” in a number of regions, including Canada, Europe and Japan. 


Gap owns and operates several other clothing brands, including Banana Republic Global, which saw its global comparable sales slump 22%. 


There was a better trading performance for Athleta and Old Navy with a 26% and 6% spike in sales, respectively.  


Gaps online sales also soared 49% in Q4 as more customers turned to digital offerings.  


CEO Sonia Syngal said that Gap and its brands were able to “gain meaningful market share” in a “fragmented environment”. 


While the latest report was hit and miss for Gap, there was a generally positive reaction from analysts on Friday after its management said that sales for 2021 could rise between 15% and 19%. 


J.P. Morgan’s Matthew Boss outlined five areas that the San Francisco-based company has “on tap” to drive growth. 


They include the upcoming launch of a Yeezy line due in the summer and a retail-based rebound for Banana Republic in the second half of the year. 


Boss saw fit to add $2 to a new $32 price target and reiterated an overweight rating. 


Jefferies’ Janine Stichter said that there were signs that Gap’s “Power Plan” was coming to fruition as she went from $24 to $25, but stood pat on a hold rating.  


Gap shares jumped after the first bell on Friday and held firm for the rest of the day, eventually closing +7.60% at $27.31. 

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