Gap (GPS) Stock Rallies Today on November Comp Sales Growth

NEW YORK (TheStreet) -- Shares of The Gap (GPS) are rising, up 0.9% to $40.92 in early market trading on Friday, continuing its gains from after-hours trading yesterday on upbeat comparable sales numbers for November.

The clothing retailer announced that comparable sales grew 6% from a year ago to $1.72 billion, up from $1.63 billion in November of 2013.

Gap saw gains of 18% at its Old Navy stores, up from a 3% gain in November of 2013. Banana Republic sales was up 2% for November, better than the 1% decline it reported last year. 

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However, Gap stores saw a 4% decline in November sales, compared to its year ago 2% gain.

"With much of the holiday season still ahead, we remain focused on strong execution across all of our brands," said chairman and CEO Glenn Murphy in a statement.

Separately, TheStreet Ratings team rates GAP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate GAP INC (GPS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Net operating cash flow has increased to $118.00 million or 22.91% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.81%.
  • 40.15% 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, GPS's net profit margin of 8.84% compares favorably to the industry average.
  • GAP INC has improved earnings per share by 11.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern 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. For the next year, the market is expecting a contraction of 0.5% in earnings ($2.74 versus $2.75).
  • You can view the full analysis from the report here: GPS Ratings Report

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