Gap closes the gap

Banana Republic, Old Navy, and Gap: All essential ingredients of the corporate uniform your millennial HR rep dons when delivering bad news in a chipper tone.

But Gap, the retail behemoth behind those brands, announced some very good news today.

Gap shares soared 12.84% after the company reported a stellar third quarter—and an even rosier outlook.

• Earnings per share came in at $0.72, outpacing the $0.58 analysts expected to see.
• $3.83 billion in revenue rose 2% year over year and beat the $3.81 billion analysts forecast.
• Gap said it expects its fiscal 2024 sales will rise between 1.5% and 2%, far ahead of the 0.4% growth analysts were anticipating.
• Management boosted operating income forecasts from the 50% it previously expected to around 60% in the fiscal year.

The brand breakdown: Athleta sales grew by 4%, while Banana Republic’s sales rose 2%, and Old Navy and the Gap brand’s sales each jumped 1%.

What’s even more impressive is how well the company performed in spite of hurricanes closing stores and driving store sales down about 2%, CEO Richard Dickson told CNBC in an interview.

A Hallmark-ready turnaround story

Dickson has led a renaissance for the retailer since he became CEO in August 2023. He has focused on doubling down on the identity of each brand under the Gap umbrella, as well as focusing on celebrity partnerships.

The result: Sales have grown for the past four quarters straight, and the stock is up 19.05% year to date.

In a note today, Morgan Stanley equity analyst Alex Straton explained that this recent quarter was “further evidence that the new management’s brand reinvigoration/turnaround strategies are proving successful.” She maintained her “overweight” rating on the stock.

While this quarter was undeniably good, Dickson also has high expectations for the holiday season. “Holiday is off to a strong start and we remain focused on executing with excellence in the fourth quarter,” he said in a statement.

So even if you’re more of a H&M or Zara fan, you might want to dress your portfolio in Gap.—LB