Gap Sees Share Price Rise Despite Warning on 2nd-Quarter Earnings
Investors decided Thursday that shares of Gap Inc. and some other battered retailers have been punished enough.
Gap stock jumped $3.50 to $33.38, even though it warned that fiscal second-quarter profit would come in below the Wall Street consensus after June sales at stores open at least one year fell 2%.
Analyst Sharon Pearson of Morgan Stanley Dean Witter said she had anticipated the 2% drop, “but other people were expecting it to be greater than that. I think a lot of us feel good about the figure.”
Gap (ticker symbol: GPS), which operates 3,224 stores under such brand names as the Gap, Baby Gap, Gap Kids, Banana Republic and Old Navy, said overall sales for the five weeks ended Saturday rose 19% to $1.17 billion.
But as a result of lower reported margins in the quarter to date, Gap said its earnings for the second quarter will probably come in about 3 cents below the current consensus estimate of 26 cents a share. The company earned 22 cents per share in the second quarter a year ago.
Despite the second-quarter shortfall, Gap said it didn’t anticipate changes to the third- and fourth-quarter range of analysts’ estimates.
The stock had already been severely pummeled in recent months. From a peak of $52.88 on Feb. 3, the shares dived 46% to a recent low of $28.69.
At Thursday’s close, the stock was priced at 22 times analysts’ consensus earnings estimate of $1.54 a share for the current fiscal year.
The $30-a-share range is where Gap bottomed in October before rallying sharply.
Among other retail shares Thursday, as major companies reported June sales:
* Abercrombie & Fitch (ANF) surged $2.75 to $14.38 after the seller of clothes for young adults and teens said June sales at stores open at least a year fell 4% from a year earlier. The good news: That was less than May’s double-digit decline.
Abercrombie’s stock has collapsed over the last year, from a peak of $49.69, as its sales have slumped. Yet analysts still expect the company to earn about $1.58 a share this year.
* Pacific Sunwear (PSUN) gained $1.05 to $18.44 despite its warning that fiscal second-quarter earnings will miss estimates because of a slight sales decline in June.
As with Abercrombie and Gap, Pacific Sunwear’s stock already has been slashed. It peaked at almost $40 in spring.
* Ross Stores (ROST) wasn’t so fortunate. Its shares crumbled $2 to $14.81 after the second-largest chain of off-price apparel stores said second-quarter profit may fall short of analysts’ estimates because of slowing sales.
Wachovia Securities analyst David Buchsbaum cut his 2000 earnings estimate for Ross to $1.90 a share from $2.04.
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Gap’s White-Knuckle Ride
Shares of retail giant Gap Inc. (ticker symbol: GPS) have been extremely volatile over the last year, plunging on earnings fears in late summer of last year, soaring
again early this year, then
diving in April and May.
Monthly closes
and latest:Wednesday:
$33.38,
up $3.50
