No more earnings remaining for Gap stocks?
[Updated: 10/01/21] GPS inventory update
Gap Inc. (NYSE: GPS) recently released its second quarter report, in which revenues were 2% lower and earnings per share were 40% higher than our estimates. The company’s revenue grew 28% year-over-year to $ 4.2 billion, thanks to an easy comparison with last year. That said, the company’s revenue was also 5% higher than pre-pandemic levels compared to the second quarter of 2019. Old Navy and Athleta sales were up 21% and 35% respectively. % compared to the same quarter before Covid, while sales of the Gap and Banana Republic brands decreased compared to 2019. In addition, the retailer’s gross margin increased by 440 basis points compared to 2019, thanks to the leverage of 65% growth in online sales (compared to 2019) and reduced spending due to store closings. In addition, the company also announced its acquisition of Drapr, an online apps startup that allows customers to design 3D avatars and virtually try on clothes.
For fiscal 2021, Gap has raised its forecast for the full year and now expects sales growth of around 30% compared to 2020. It expects the operating margin to rise. at around 7% and that earnings per share will be between $ 1.90 and $ 2.05. for the whole year. To add to this, the company also plans to open 50 to 70 Old Navy and Athleta stores while closing approximately 75 Gap and Banana Republic stores in 2021, to capitalize on changing consumer brand tastes. We updated our model after the release of the second fiscal quarter. We are now planning Gap revenues to $ 17.8 billion in fiscal 2021, up 29% year-on-year, compared to a previous forecast of 24% year-over-year revenue growth. We also expect EPS to settle at $ 1.97, down from a loss of $ 1.78 last year, compared to our previous estimate of $ 1.78. In view of the evolution of our revenue and profit forecasts, we have revised our Gap assessment at $ 30 per share, based on expected EPS of $ 1.97 and a 15-fold P / E multiple for fiscal 2022, which is 19% more than the current market price. The company’s stock is up 28% year-to-date.
[Updated: 08/24/21] Q4 GPS pre-gains
Action Gap Inc. (NYSE: GPS), a specialty retailer selling casual wear, accessories and personal care products for men, women and children under the Gap, Old Navy and Banana Republic brands, is expected to release its second fiscal year. financial. quarterly results on Thursday August 26. We expect Gap stock to trade higher due to better than expected second quarter 2021 results, with revenue and earnings above consensus. While the retailer saw a serious decline in sales in 2020, it showed encouraging signs in the first quarter as vaccine rollout gained momentum. In fact, Gap’s total sales in the recent first quarter increased 89% year-on-year and even exceeded 2019 levels by 8%. The company has also increased its annual sales forecast and now expects revenue growth of over 20%. That said, the company’s digital transition and cost reduction initiatives look good for the company’s long-term prospects. Our forecast indicates that Gap’s valuation is $ 32 per share, which is 12% higher than the current market price of around $ 28. Check out our interactive dashboard analysis at the gap Pre-wins: What to expect in the second trimester? for more details.
(1) Revenue expected ahead of consensus estimates
Trefis estimates Gap’s turnover in the second quarter of 2021 at $ 4.2 billion, or 3% ahead of market expectations. In the first quarter, the company’s comparable sales grew 28% year-on-year and 25% year-on-year. In addition, its digital sales increased 82% year-on-year, which also represents 40% of its total sales mix. The company’s gross margin increased 450 basis points (bps) from a year ago to 40.8%, thanks to online growth, store closings and rent negotiations. As usual, the Old Navy and Athleta brands posted the best performance in the business, increasing their comparable sales by 27% and 56%, respectively, from the first quarter of 2019. However, Banana Republic sales were down. fell 29% and those of The Gap brand declined. 16%. It should be noted that Old Navy and Athleta together account for 66% of total revenue, and the company aims to increase that number to 70% by 2023 as part of its ambitious power plan to restructure the brand composition and to establish strategic partnerships.
For the year 2021, we forecast Gap’s revenue to grow 24% year-on-year to $ 17.1 billion.
2) EPS likely to be higher than consensus estimates
Gap FQ2 2021 earnings per share is expected to be $ 0.48 per Trefis analysis, which is 12% more than the consensus estimate of $ 0.43. In the first quarter, the company’s earnings per share were $ 0.43, down from a loss of $ 2.51 last year. Thanks to strong first quarter results, Gap raised its full-year Adjusted EPS forecast to $ 1.60 to $ 1.75, from $ 1.20 to $ 1.35 previously. .
(3) Estimate of the share price higher than the current market price
Based on our assessment of the spread, with an EPS estimate of $ 1.78 and a P / E multiple of 17.8x in fiscal 2021, that translates to a price of $ 32, or 12 % more than the current market price of about $ 28.
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