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Author: Alan LittleDate: 2020-11-26

Gap (GPS) plummets 20% after Q3 earnings miss the mark

Gap (GPS) shares plummeted more than 16% on Wednesday after the clothing retailer fell short of the Wall Street consensus in its latest report – Citigroup subsequently downgraded its rating to neutral on concerns about Q4 sales.

Late on Tuesday, Gap posted $0.25 per share earnings for Q3, which was 12 cents lower than a year ago and 10 cents short of expectations.

Revenue fared better, but the $3.99bn figure did not quite match up to the $4bn forecasts.

 While the ongoing pandemic led to a drop in footfall to physical stores, Gap did record a 61% uptick in digital sales.

Comparable same-store sales declined 5% overall at Gap stores, but there were mixed fortunes for its offshoot brands – Banana Republic slumped 30%, while Old Navy (+17%) and Athleta (+37%) both jumped.

The earnings miss shaped the narrative for analysts and investors on Tuesday as Citigroup pivoted to a neutral rating and shaved three cents off a lower $27 price target.

 Analyst Paul Lejuez believes that uncertainty about COVID-19-related developments will likely result in flat sales for the current quarter (Q4).

Gap shares plunged in premarket trading and did not move after markets opened.

GPS was trading 18.61% lower for a new $21.87 share price at around 12:30 pm (ET) on the New York Stock Exchange.

HP Inc. (HPQ) also reported in midweek, coming in with better-than-forecast earnings and revenue.

The computing company posted $0.62 earnings per share and $15.3bn revenue versus the $0.52 and $14.6bn consensus.

 Morgan Stanley said that the strong results are evidence of robust demand for “products in the home” as it continued with an equal-weight rating and added four cents to a new $26 PT.

 HP stock had risen 2.25% to $22.25 by midday.

Sources:

  • https://www.thestreet.com/investing/gap-gps-stock-plunge-earnings-miss-analyst-downgrade

 

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