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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.
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