NEW YORK (TheStreet) -- Shares of Gap (GPS - Get Report) were falling 1.5% to $32.50 after-hours Thursday after the apparel retailer reported sales data for the month of August.

Gap reported that sales fell 3% year over year in August to $1.2 billion, with flat growth on a constant currency basis.

Comparable store sales fell 2% in the month despite growth in Old Navy comparable sales. Comparable store sales grew 6% for the Old Navy Brand in the month, but fell by 8% for the Gap brand and 11% for the Banana Republic brand.

"We're pleased that Old Navy delivered another strong month of positive comps driven by a healthy back-to-school business, as we remain focused on improving product performance across our portfolio," CFO Sabrina Simmons said in a statement.

The company said the timing of the Labor Day holiday hurt its sales compared to August of last year, despite the shift of some tax-free holidays to August from July.

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 several positive factors, 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 largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels and expanding profit margins. We feel its 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:

  • 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.
  • 37.40% 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.
  • GPS, with its decline in revenue, underperformed when compared the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: GPS Ratings Report