Gap (GPS) Consumer Discretionary - Specialty Retail | Reports August 18, After Market Closes

Key Takeaways

• The Estimize consensus is calling for earnings per share of 57 cents on $3.80 billion in revenue, 1 cent lower than Wall Street on the bottom line and nearly $15 million on the top
• Gap has already indicated that net sales and comparables sales were down for the second quarter
• Rising popularity of fast fashion trends and increasing competition from online retailers have put pressure on sales, specifically in mall based stores

The Gap Inc. (GPS) is scheduled to report second quarter earnings today, after the market closes. Despite the broader surge from retailers this season don’t expect Gap to be apart of that lively trend. The clothing retailer typically pre releases its sales metrics leaving very little surprise on the actual report date. For the second quarter net sales and comparables sales were down compared to a year earlier.

Earnings are expected in the range of 58 to 59 cents for the quarter. That compares with Estimize estimates that are calling for earnings of 57 cents per share, or 15% below the year earlier. Shockingly, per share estimates have jumped 16% since Gap’s most recent report in May.

Investors looking for a turnaround this quarter may need to wait a bit longer. Net sales for the quarter were reported down to $3.85 billion compared with $3.90 billion last year. Overall comparable sales for the second quarter were down 2%. This includes a 3% decline in its namesake Gap brand, a 9% drop from Banana Republic and flat Old Navy sales. Shares are still up 44% in the past 3 months

The biggest problems have been the rising popularity of fast fashion and online retailers. Gap has been unable to revise its product portfolio in a way that is consistent with current fashion trends and customers changing preferences. Meanwhile, mall traffic, where most of it stores are located, continue to dwindle. Customer are simply choosing to spend their time elsewhere over their local mall. Based on the way things are going in the retail space, a small surprise could send the stock soaring. 

Photo Credit: Mike Mozart