NEW YORK (TheStreet) -- Gap (GPS - Get Report) was gaining 4.9% to $42.18 after-hours Thursday after reporting better-than-expected July sales results and issuing a second-quarter guidance above expectations.
The retailer reported total sales of $1.17 billion for the month of July, a 5% increase from July 2013. Same-store sales increased 2% in the month, above the 0.1% analysts' expected according to Thomson Reuters. The higher same-store sales were driven by the Banana Republic which performed well in the month.
Gap also said that it expects earnings of 68 cents to 69 cents a share for the second quarter, above analysts' estimates of 66 cents a share.
TheStreet Ratings team rates GAP INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate GAP INC (GPS) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GPS's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market, GAP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $513.00 million or 44.10% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.20%.
- GAP INC's earnings per share declined by 18.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GAP INC increased its bottom line by earning $2.75 versus $2.32 in the prior year. This year, the market expects an improvement in earnings ($2.93 versus $2.75).
- You can view the full analysis from the report here: GPS Ratings Report