By Kuldip K. Ambastha
The Gap, Inc. (GPS) is a prominent American company in the clothing and accessories retail sector, with store locations worldwide. The company was founded in 1969 by Donald Fisher and Doris F. Fisher, and is headquartered in San Francisco, CA. On Wednesday, November 25, 2020, the company’s stock had a -19.6% loss for the day. The global coronavirus pandemic has been causing damage in the retail sector, and the company missed its 3Q2020 earnings forecast target. The Gap, Inc.’s 3Q2020 sales were flat, at about $4 billion, compared to the same quarter in the prior year. The company owns several fashion brands. Old Navy and Athleta did quite well during 3Q2020, while Gap and Banana Republic struggled mightily in contrast.
Online sales were strong during the quarter, while in-store sales were weak. High shipping costs ate into the profit margin related to online sales. In aggregate, earnings per share (EPS) for 3Q2020 came in at $0.25, which is lower than the $0.37 figure from 3Q2019. For 3Q2020, the average analyst EPS forecast had been $0.32. Missing the EPS forecast by $0.07 led to the -19.6% loss noted above. The management team of The Gap, Inc. expects more tough times ahead. Given the uncertainty seen around the world, The Gap, Inc. did not give any guidance for what should be expected in 4Q2020. High shipping costs for online sales, coronavirus-related public safety costs, and large marketing expenditures are expected by The Gap, Inc. in the near future. These factors may detract from the stock’s performance post-3Q2020.
Keywords – The Gap, Inc., Gap, Inc., GPS, Donald Fisher, Doris F. Fisher, clothing, accessories, retail, stores, online, Internet, San Francisco, SF, California, CA, global, coronavirus, COVID-19, pandemic, Old Navy, Athleta, Gap, Banana Republic, earnings per share, EPS, 3Q2020.
Disclosure – The principals and clients of Ambastha Financial LLC have no positions in GPS.
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