Shares of Gap Inc. gained 3.6% in Thursday’s extended trading session after the clothing and accessories retailer reported stronger-than-expected 4Q earnings.
Gap’s (GPS) 4Q adjusted earnings of $0.28 per share exceeded analysts’ expectations of $0.18. However, the bottom-line result marked a year-over-year decline of 51.7%, reflecting lower revenues.
Revenues fell 5% to $4.42 billion year-on-year and came in below the Street’s estimate of $4.66 billion. The decline reflects the negative impact from mandatory store closures amid the COVID-19 pandemic, soft store traffic in select regions across the US, and strategically planned permanent store closures.
Comparable store sales during the fourth quarter remained flat on a year-over-year basis as the decline of in-store sales was offset by an increase in online sales. The company’s online sales grew 49% year-on-year and represented about 46% of net sales in 4Q. Meanwhile, store sales plunged 28%. (See Gap stock analysis on TipRanks).
For fiscal 2021, Gap expects revenues to grow in the mid-to-high teen percentage range. The company forecasts earnings per share to be between $1.20 and $1.35.
Following the earnings release, Guggenheim analyst Robert Drbul reiterated his Hold rating on the stock. In a note to investors, Drbul wrote, “While we believe there are attractive characteristics to be found in Gap’s Athleta and Old Navy brands (higher margin and growth profiles), we continue to believe there is significant uncertainty around the company’s revenue and earnings trajectory given its largely mall based store fleet. We anticipate significant mall store closures and traffic challenges in coming periods.”
Turning now to the rest of the Wall Street community, Gap has a Hold consensus rating based on 4 Holds and 1 Buy. The average analyst price target of $25.40 implies that the stock is fully priced at current levels. Shares have gained 77.7% over the past 12 months.