Things have gotten so bad at
that a double-digit decline in monthly sales has become a reason to buy the stock.
Gap said Thursday that same-store sales, which gauge activity in stores open at least a year, declined 24% in April -- marking a jaw-dropping 25th straight monthly decline at Gap. But in part because the seers known as Wall Street analysts had been expecting at least a 30% drop, the stock rallied 7%.
The stock's rise was partly attributed to the company's forecast that it will turn a profit in the first quarter; Wall Street had been anticipating a loss. Gap said it expects a profit of 2 cents to 3 cents a share, compared to a consensus estimate of a 4-cent loss, according to Thomson Financial/First Call.
Investors bid Gap higher by $1.05 to $15.76. Stock in the company, which has been in
turnaround mode, to put it nicely, for about two years, is up over 13% on the year, as investors cling to hopes the company can revive its fortunes.
The company's slightly better-than-expected sales and revised earnings guidance had many chirping that Gap's return to basics -- khakis, jeans and oxfords -- is starting to pay off. "I've seen some changes in the stores, but there's still a long way to go," says Marcia Aaron, who covers the apparel scene for Pacific Growth Equities. "They still have to balance the need to be basic with the need for something new and exciting."
Dennis Van Zelfden, of SunTrust Robinson Humphrey, says that Gap hasn't been forced to slash prices lately to the levels of earlier this year. That has helped margins. "Gap merchandise is getting better and better," he says. "We're seeing the beginning of that, but we won't see the full impact until back-to-school in the fall." (He has an outperform rating on the stock, and his firm does not have a banking relationship with Gap.)
Gap's April sales were the worst of any of the major retailers that reported Thursday, as they often have been during the company's long dry spell. But other stocks were taking a beating as their sales missed the mark.
, for example, reported a 3.3% gain in same-store sales, at the low end of the company's forecasts. The stock was off $2.09, or 3.7%, at $54.30.
, meanwhile, reported just a 0.4% gain -- analysts had been expecting a 3% rise -- and shares were off lately $2.72, or 6.1%, at $41.60.