Wall Street analysts seem to have detached from reality when it comes to beleaguered retailer Gap (GPS) .
Gap reported Monday evening that its same-store sales in October fell 1%, the tenth month of slower sales out of the last 11. Wall Street was banking on a 2% decline. The better-than-expected sales number for Gap -- driven mostly by a 3% same-store increase at the value-oriented Old Navy chain -- masked continued disturbing declines at the Gap and Banana Republic divisions.
Gap brand sales have declined for an alarming 10 straight months, and Banana Republic sales have fallen for a dizzying 20 straight months, according to the company.
Same-store sales at Banana Republic fell 4% in October. At Gap, same-store sales cratered 7%. Gap said third-quarter earnings will be in a range of 59 cents a share to 60 cents a share. Wall Street was banking on 53 cents a share.
Analysts tripped over themselves to heap praise on Gap execs for starting to drive improving sales results and profit margins.
"We are encouraged by October sales that beat expectations and management commentary that underscored momentum at Old Navy, as well as signs of stabilization at Gap," gushed Jefferies analyst Randy Konik in a note. Konik reiterated his buy rating on Gap's stock.
The upbeat tone on Gap was shared elsewhere.
"While the Gap banner remains a work in progress, we are encouraged as Old Navy's turnaround continues to gain momentum from which same-store have been flat or positive for five consecutive months," crowed Keybanc analyst Ed Yruma, who added that Gap's shares are "compelling" headed into the holiday season. Yruma reiterated his overweight rating on Gap, the equivalent of a buy rating.