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Gap (GPS) Stock Surges 78% in Past Six Months: Here's Why
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The Gap, Inc. stock is well-poised to tap the positive trends in the fashion arena, thanks to its robust strategic initiatives, including the Power Plan 2023 Strategy. The company has been gaining from brand strength and solid demand for its products that resonate well with customers. Buoyed by such strengths, shares of this clothing and accessories retailer have soared 78% compared with the industry’s 23.6% growth in the past six months.
A VGM Score of A further adds strength to this current Zacks Rank #1 (Strong Buy) company. The Zacks Consensus Estimate for GPS’ fiscal 2025 sales and earnings per share is pegged at $15.1 billion and $1.50, respectively, suggesting increases of 1.7% and 10.3% year over year. This highlights analysts’ confidence in the stock.
Let’s Delve Deeper
Gap’s Power Plan 2023 Strategy focuses on opening highly profitable Old Navy and Athleta stores while closing the underperforming Gap and Banana Republic stores. It expects to leverage its powerful platform to deliver competitive omni capabilities to meet customers’ needs, fueled by its scaled operations. Through the plan, the company expects to deliver consistent sales growth, margin expansion and strong operating cash flow.
Gap is aggressively undertaking cost-management actions. It has been simplifying and optimizing its operating model and structure, including increasing spans of control and decreasing management layers, to improve the quality and speed of decision-making. It is also creating a consistent organizational structure across its brands. The company is focused on actioning more than $550 million in annualized cost savings and realizing margin expansion on lower air costs, improved discounting and effective sourcing strategies.
Image Source: Zacks Investment Research
Gap has been gaining from lower airfreight and improved promotional activity. This has been aiding the company’s margins and, in turn, the overall profitability. During third-quarter fiscal 2023, the gross margin expanded 390 basis points (bps) year over year on a reported basis and 260 bps on an adjusted basis. Merchandise margin increased 340 bps on 180 bps of leveraged commodity costs and lower air utilization and 160 bps of improved promotional activity from better inventory position and robust assortments.
Management is committed to creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Given all the positives, Gap stock seems to deserve a place in your investment portfolio.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales suggests growth of 3.3% from the year-ago reported figure. AEO delivered an earnings surprise of 22% in the last reported quarter.
Abercrombie, a leading apparel retailer, currently sports a Zacks Rank of 1. ANF delivered an earnings surprise of 715.6% in the trailing four quarters.
The Zacks Consensus Estimate for Abercrombie’s financial-year sales suggests growth of 5.6% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an earnings surprise of 32.1% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales suggests growth of 15.8% from the year-ago reported figure.
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Gap (GPS) Stock Surges 78% in Past Six Months: Here's Why
The Gap, Inc. stock is well-poised to tap the positive trends in the fashion arena, thanks to its robust strategic initiatives, including the Power Plan 2023 Strategy. The company has been gaining from brand strength and solid demand for its products that resonate well with customers. Buoyed by such strengths, shares of this clothing and accessories retailer have soared 78% compared with the industry’s 23.6% growth in the past six months.
A VGM Score of A further adds strength to this current Zacks Rank #1 (Strong Buy) company. The Zacks Consensus Estimate for GPS’ fiscal 2025 sales and earnings per share is pegged at $15.1 billion and $1.50, respectively, suggesting increases of 1.7% and 10.3% year over year. This highlights analysts’ confidence in the stock.
Let’s Delve Deeper
Gap’s Power Plan 2023 Strategy focuses on opening highly profitable Old Navy and Athleta stores while closing the underperforming Gap and Banana Republic stores. It expects to leverage its powerful platform to deliver competitive omni capabilities to meet customers’ needs, fueled by its scaled operations. Through the plan, the company expects to deliver consistent sales growth, margin expansion and strong operating cash flow.
Gap is aggressively undertaking cost-management actions. It has been simplifying and optimizing its operating model and structure, including increasing spans of control and decreasing management layers, to improve the quality and speed of decision-making. It is also creating a consistent organizational structure across its brands. The company is focused on actioning more than $550 million in annualized cost savings and realizing margin expansion on lower air costs, improved discounting and effective sourcing strategies.
Image Source: Zacks Investment Research
Gap has been gaining from lower airfreight and improved promotional activity. This has been aiding the company’s margins and, in turn, the overall profitability. During third-quarter fiscal 2023, the gross margin expanded 390 basis points (bps) year over year on a reported basis and 260 bps on an adjusted basis. Merchandise margin increased 340 bps on 180 bps of leveraged commodity costs and lower air utilization and 160 bps of improved promotional activity from better inventory position and robust assortments.
Management is committed to creating a trend-right merchandise assortment, deepening relations with customers via marketing, enhancing the digital commerce agenda and efficiently controlling expenses. Given all the positives, Gap stock seems to deserve a place in your investment portfolio.
Other Key Picks
We have highlighted three other top-ranked stocks, namely American Eagle (AEO - Free Report) , Abercrombie (ANF - Free Report) and Deckers (DECK - Free Report) .
American Eagle, a leading apparel retailer, currently sports a Zacks Rank of 1. You can see see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales suggests growth of 3.3% from the year-ago reported figure. AEO delivered an earnings surprise of 22% in the last reported quarter.
Abercrombie, a leading apparel retailer, currently sports a Zacks Rank of 1. ANF delivered an earnings surprise of 715.6% in the trailing four quarters.
The Zacks Consensus Estimate for Abercrombie’s financial-year sales suggests growth of 5.6% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an earnings surprise of 32.1% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales suggests growth of 15.8% from the year-ago reported figure.