The Gap’s (GPS) surprised investors with top-notch results today, resulting in another gap–the one between yesterday’s closing price and where it’s trading now.
Getty Images The Gap reported said it would earn 71 cents a share, well ahead of analyst forecasts for 66 cents. Even better, so-call same -store sales rose 4%, topping forecasts for a 0.6% increase.
This gap up, however, comes a little less than a month after shares of the Gap gapped down 7% on Oct. 11, following disappointing same-store sales. What will November hold?
Janney’s Adrienne Tennant and Gabriella Carbone urge caution. They write:
We believe merchandise margins will be under pressure for the remainder of the year, as a result of the sector-wide increased promotional activity. For November, we are modeling a +1% comp. We point out several negative factors impacting November: 1) one week later start to retail November, 3) shorter overall holiday season, 3) one week later Thanksgiving, which will shift CyberMonday and some Black Friday DTC sales out of retail November (GPS recognizes e-commerce sales upon estimated receipt by customer)…
…offsetting this, and specific to Old Navy, will be more Thanksgiving Day store openings (900 stores versus 750 last year from 9 am to 4 pm) and most of the stores open from 7 pm Thanksgiving Day through Black Friday (recall last year, Old Navy reopened at midnight missing much of the earlier off-mall traffic).
We continue to believe the global brand management structure of the business will help attain greater speed and efficiencies, as well as fuel future long term global growth; however, in the near-term we remain cautious given challenging mall traffic and aggressive promotions.
Shares of the Gap have jumped 8.9% to $41.12, while L Brands (LTD) has gained 1.6% to $62.77, Urban Outfitters (URBN) has risen 2.1% to $39.27 and Ann (ANN) has advanced 1.5% to $35.47.
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