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Gap Inc (GAP)
NYSE:GAP
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Gap Inc
(NYSE:GAP)
73Outperform
Positive Factors
Earnings
GAP reported a strong F4Q beat and provided healthy initial FY25 guidance.
Financial Performance
GAP delivered an across-the-board 4Q beat and set initial guidance above expectations, showcasing performance consistency and increasing confidence in turnaround potential.
Market Strategy
Accelerating comp momentum indicates that GAP’s brand reinvigoration strategy is working.
Negative Factors
Brand Performance
Athleta was the only pain point of the quarter, with comp -2% as the brand saw holiday underperformance from their core customer.
Macro Environment
Despite macro choppiness, management sees trends improving through the fiscal year as consumers respond to product and marketing shifts with share gains seen across the business.
Sales Performance
Weather disruptions led to softer demand in early February, affecting sales performance.
Gap Inc (GAP) vs. S&P 500 (SPY)
Market Cap
$8.02B
Dividend Yield2.81%
Average Volume (3M)9.92M
Price to Earnings (P/E)9.8
Beta (1Y)1.54
Revenue Growth1.32%
EPS Growth65.83%
CountryUS
Employees82,000
SectorConsumer Cyclical
Sector Strength51
IndustryRetail - Discretionary
Share Statistics
EPS (TTM)2.20
Shares Outstanding374,904,720
10 Day Avg. Volume11,049,298
30 Day Avg. Volume9,921,732
Financial Highlights & Ratios
PEG Ratio0.15
Price to Book (P/B)N/A
Price to Sales (P/S)0.50
Price to Cash Flow (P/CF)3.10
P/FCF Ratio3.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$28.64Price Target Upside34.90% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering14
Gap Inc Business Overview & Revenue Model
Company DescriptionGap Inc. is a leading global retailer offering clothing, accessories, and personal care products for men, women, and children. Founded in 1969 and headquartered in San Francisco, California, the company operates a diverse portfolio of brands, including Gap, Old Navy, Banana Republic, Athleta, and Intermix. With a focus on delivering modern, stylish, and affordable apparel, Gap Inc. serves customers through a combination of company-operated stores, franchise stores, and e-commerce websites across numerous international markets.
How the Company Makes MoneyGap Inc. generates revenue primarily through the sale of apparel, accessories, and personal care products under its various brand names. Its business model is centered around direct-to-consumer sales via both physical retail locations and online platforms. The company's key revenue streams include sales from its owned retail stores, e-commerce operations, and franchised locations. Additionally, Gap Inc. benefits from strategic partnerships and collaborations that expand its market reach and appeal, as well as its loyalty programs that enhance customer engagement and retention. Seasonal promotions, marketing campaigns, and a focus on trend-responsive product lines also contribute significantly to its earnings.
Gap Inc Financial Statement Overview
Summary
Gap Inc. shows solid financial performance with strong profitability and healthy cash flow metrics. The company maintains a balanced yet leveraged balance sheet. While current performance is positive, historical volatility and high liabilities could pose challenges. Overall, Gap Inc. is positioned well in the retail sector but should monitor financial leverage and continue focusing on operational efficiencies.Income Statement
Gap Inc. demonstrates strong profitability with a Gross Profit Margin of 41.2% and a Net Profit Margin of 5.4% for TTM (Trailing-Twelve-Months). The revenue growth rate from the previous year is 2.3%, indicating a modest recovery trajectory. Additionally, the EBIT Margin stands at 7.1%, and the EBITDA Margin is at 11.0%, reflecting operational efficiency. However, fluctuations in past revenue and profit levels suggest potential volatility.78
Positive
Balance Sheet
The company's Debt-to-Equity Ratio is 1.74, indicating moderate leverage. Return on Equity (ROE) is 26.3%, showcasing strong shareholder returns. The Equity Ratio is 26.5%, denoting a balanced capital structure. Despite these strengths, relatively high total liabilities indicate potential financial risk.65
Positive
Cash Flow
Gap Inc. demonstrates robust cash flow generation, with an Operating Cash Flow to Net Income Ratio of 1.91 and a Free Cash Flow to Net Income Ratio of 1.35. Free Cash Flow growth is stable, highlighting effective cash management. Nonetheless, significant capital expenditures could impact future liquidity.72
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 15.23B | 14.89B | 15.62B | 16.67B | 13.80B | 16.38B | Gross Profit |
| 6.28B | 5.78B | 5.36B | 6.64B | 4.71B | 6.13B | EBIT |
| 1.08B | 622.00M | -69.00M | 1.14B | -862.00M | 574.00M | EBITDA |
| 1.67B | 1.17B | 489.43M | 994.00M | -403.00M | 1.16B | Net Income Common Stockholders |
| 823.00M | 502.00M | -202.00M | 256.00M | -665.00M | 351.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 2.22B | 1.87B | 1.22B | 877.00M | 2.40B | 1.65B | Total Assets |
| 11.85B | 11.04B | 11.39B | 12.76B | 13.77B | 13.68B | Total Debt |
| 5.47B | 5.44B | 6.02B | 6.25B | 7.66B | 7.68B | Net Debt |
| 3.50B | 3.57B | 4.80B | 5.37B | 5.68B | 6.31B | Total Liabilities |
| 8.72B | 8.45B | 9.15B | 10.04B | 11.15B | 10.36B | Stockholders Equity |
| 3.13B | 2.60B | 2.23B | 2.72B | 2.61B | 3.32B |
| Cash Flow | Free Cash Flow | ||||
| 1.11B | 1.11B | -78.00M | 115.00M | -155.00M | 366.00M | Operating Cash Flow |
| 1.57B | 1.53B | 607.00M | 809.00M | 237.00M | 1.41B | Investing Cash Flow |
| -707.00M | -334.00M | -227.00M | -446.00M | -510.00M | -894.00M | Financing Cash Flow |
| -244.00M | -567.00M | 6.00M | -1.47B | 895.00M | -560.00M |
Gap Inc Technical Analysis
Neutral
21.23
Price Trends
22.37
Negative
22.88
Negative
22.52
Negative
Market Momentum
-0.36
Negative
48.91
Neutral
72.22
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GAP, the sentiment is Neutral. The current price of 21.23 is above the 20-day moving average (MA) of 20.92, below the 50-day MA of 22.37, and below the 200-day MA of 22.52, indicating a neutral trend. The MACD of -0.36 indicates Negative momentum. The RSI at 48.91 is Neutral, neither overbought nor oversold. The STOCH value of 72.22 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for GAP.
Gap Inc Risk Analysis
Gap Inc disclosed 30 risk factors in its most recent earnings report. Gap Inc reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Gap Inc Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $4.91B | 12.33 | 17.56% | ― | 7.71% | 40.01% | |
74 Outperform | $3.91B | 7.24 | 47.77% | ― | 15.60% | 71.45% | |
73 Outperform | $8.02B | 9.81 | 28.81% | 2.81% | 1.32% | 65.83% | |
67 Neutral | $2.07B | 7.30 | 18.80% | 4.17% | 1.27% | 96.32% | |
66 Neutral | $4.07B | 14.00 | 29.58% | 3.11% | 2.20% | 120.00% | |
60 Neutral | $5.83B | 273.55 | 7.53% | 0.13% | ― | ― | |
59 Neutral | $12.60B | 11.17 | 0.97% | 3.72% | 1.34% | -21.34% |
* Consumer Cyclical Sector Average
Performance Comparison
GAP
Gap Inc
21.23
-5.60
-20.87%
ANF
Abercrombie Fitch
77.53
-47.80
-38.14%
AEO
American Eagle
11.91
-13.24
-52.64%
JWN
Nordstrom
24.45
4.84
24.68%
URBN
Urban Outfitters
51.82
8.40
19.35%
LB
LandBridge Company LLC Class A
76.26
53.37
233.16%
Gap Inc Earnings Call Summary
Earnings Call Date: Mar 6, 2025 | % Change Since: 8.98% | Next Earnings Date: May 22, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong and positive overall sentiment, with significant financial achievements and market share gains across all brands, despite some challenges faced by the Athleta brand and impacts from the 53rd week loss.Highlights
Record-Breaking Year-End Results
The Gap, Inc. delivered positive comps in all four quarters of 2024, with all brands comping flat to positive for the year. The company achieved one of its highest gross margins in the last 20 years, increased operating income by over $500 million, and achieved the highest EPS since 2018 at $2.20.
Market Share Gains Across All Brands
The Gap, Inc. gained market share for the eighth consecutive quarter, led by Old Navy's leadership as the number one specialty power brand and retailer in the US. Gap brand accelerated to 7% comps, marking its fifth consecutive quarter of positive comps.
Strong Financial Position
The company ended the year with $2.6 billion in cash and generated $1 billion in free cash flow, allowing for a strong balance sheet and the ability to invest in growth opportunities.
Operational and Financial Rigor
The company expanded operating margin by 330 basis points compared to last year's adjusted margins, demonstrating significant progress in cost structure management and financial discipline.
Brand Reinvigoration Success
Old Navy delivered one of its highest annual net sales in history, and Banana Republic saw notable improvement with a 4% comp increase. Both brands showed signs of sustained growth and market relevance.
Lowlights
Challenges with Athleta Brand
Athleta struggled with a negative 2% comp in the fourth quarter and did not meet expectations for customer engagement during peak holiday shopping moments, indicating a need for brand reinvigoration and improvement.
Impact of 53rd Week Loss
Net sales for the fourth quarter decreased by 3% year over year, impacted by the 7 percentage point negative effect related to the loss of the 53rd week.
Company Guidance
During the fourth quarter of fiscal year 2024, The Gap, Inc. delivered impressive financial results, with comparable sales up 3% across the portfolio, marking the fourth consecutive quarter of positive comps. Old Navy, the largest brand, also reported a 3% increase in comparable sales and achieved its eighth consecutive quarter of market share gains. The Gap brand saw a 7% rise in comps, marking its fifth consecutive quarter of positive performance, while Banana Republic achieved a 4% increase. However, Athleta faced challenges with a 2% decline in comps. The company enhanced its gross margin by 250 basis points year-over-year to 38.9% and expanded its operating margin by 330 basis points to 7.4% for the full year, with operating income growing by over $500 million. Earnings per share reached $2.20, the highest since 2018, and the company ended the year with strong cash balances of approximately $2.6 billion and generated $1 billion in free cash flow. Looking ahead, The Gap, Inc. expects net sales to grow by 1-2% in fiscal 2025, with continued gross margin expansion and SG&A leverage, aiming for 8-10% growth in operating income.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.