Here's Why Gap (GPS) Stock is Lower Today
NEW YORK (TheStreet) -- The Gap (GPS) - Get Report shares are slumping 2.13% to $26.71 on Wednesday, continuing yesterday's slide after giving a weaker-than-expected earnings forecast for the recent quarter, amid challenges at its Banana Republic and Old Navy brands.
The San Francisco-based apparel retail company said that global same-store sales at Banana Republic declined 15% in October and dropped 4% at the Gap brand. However, Old Navy sales grew 2% during the same month.
For the third quarter, which ended November 1, Gap said that it estimates earnings to be between the range of 62 cents and 63 cents a share, below analysts' forecasts of 66 cents a share.
Gap will report its third quarter 2015 earnings results on November 19, after the market closes.
Additionally, Macy's (M) released disappointing revenue results and outlook earlier today, putting pressure on retailers, Reuters reports.
For the third quarter of 2015, Macy's earned 56 cents a share on revenue of $5.87 billion. Analysts surveyed by Thomson Reuters had forecast the company to earn 53 cents a share on sales of $6.09 billion.
For the full year, earnings are projected to come in between the range of $4.20 to $4.30 a share, down from the company's previous outlook of $4.70 to $4.80 a share.
Separately, TheStreet Ratings team rates GAP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate GAP INC (GPS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.50, 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. When compared to other companies in the Specialty Retail industry and the overall market, GAP INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 41.46% is the gross profit margin for GAP INC which we consider to be strong. Regardless of GPS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.61% trails the industry average.
- Net operating cash flow has decreased to $431.00 million or 10.76% when compared to the same quarter last year. Despite a decrease in cash flow of 10.76%, GAP INC is in line with the industry average cash flow growth rate of -10.88%.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income has significantly decreased by 34.0% when compared to the same quarter one year ago, falling from $332.00 million to $219.00 million.
- You can view the full analysis from the report here: GPS