Gap Inc. (GPS)
By Chloe Lutts Jensen, Chief Analyst, Cabot Dividend Investor
From Cabot Wealth Advisory 3/1/16 Sign up for Cabot Wealth Advisory—it’s free!
It may be a little too early to invest in Gap (GPS) stock, which has fallen 35% over the past 12 months due to declining revenues and the company’s struggle to meet earnings estimates.
Management is working to turn things around, making big bets on activewear and “athleisure” clothing (think of yoga pants you wear to the mall or sweats for lounging around the house).
But analysts think recovery is still a ways off—the consensus estimate calls for Gap to report 3.5% lower revenue and a 14.5% contraction in EPS this year, followed by 0.4% growth in EPS on flat revenues next year.
But the stock has delivered six consecutive years of dividend growth and trades at a very reasonable P/E of 11.
From Cabot Wealth Advisory 11/24/12 Sign up for free Cabot Wealth Advisory e-newsletters
Gap Inc.'s (GPS) Gap, Old Navy and Banana Republic clothing stores are familiar sights in the U.S. and well-represented worldwide.
While the company has always been consistently profitable, revenue and earnings growth stalled from Q2 2011 through Q1 2012. But GPS caught fire in early 2012 and shot from 18 in February to 38 in October.
Investors like what they're seeing in the refocused product lines in the flagship stores and the diversification in the relatively new specialty stores like GapKids, babyGap, GapMaternity and GapBody, as well as the Piperlime online fashion boutique and the Athleta line of women's performance gear.
There's also a 1.5% dividend to keep in mind.
|Gap Inc. (GPS)
Two Folsom Street
San Francisco, California 94105
|Index Membership: N/A
Industry: Apparel Stores
Full Time Employees: 132,000
11/24/12: Gap Inc. (GPS): Investors like what they're seeing