Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



1 Retailer With a Clear Plan

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

After the market closed yesterday, Gap (NYSE: GPS  ) announced its April sales and released a forecast for its first-quarter earnings. Comparable sales in April were up 7% this year, although investors should keep in mind that Easter was in March this year and April in 2012. Looking at the broader picture, first-quarter comparable sales were up 2%, with Gap and Old Navy both posting a 3% increase and Banana Republic coming in flat.

Investors were excited about the company's forecast earnings per share, which Gap estimated at between $0.68 and $0.69. Up to this point, analysts had anticipated $0.57 per share. The stock was up more than 5% by midday today.

A growth trend for Gap
Even though Gap's quarterly comparable sales growth trend was down compared to last year, it's still a great trend for the company. The overall trend continues to be one of growth, and the quarterly gains that Gap has managed this year on top of the gains it saw last year indicates that the recovery plan -- which was the undertaking this time last year -- has successfully translated into a new growth plan.

The growth plan contains two big initiatives -- international expansion and secondary brand growth. Specifically, the company has called out Gap China, Old Navy Japan, and Athleta as being big focuses over the course of the year.

International expansion
Gap China opened more than 30 stores last year, supported by a heavy marketing push. As CEO Glenn Murphy said on the company's annual earnings call, "If you don't build a brand in China, you are not going to make it." This year, that branding is going to drive the addition of 35 more Gap China locations.

In addition to China, Gap is going to be pushing its Old Navy brand in Japan. Last year, Gap added online stores for Gap and Banana Republic in Japan, but the focus is still on Old Navy. The brand is going to get 15 to 20 new stores this year. One issue for the Old Navy push that investors should watch out for is the weak yen. Gap has built some weakness into its forecasts, but even since the end of last year, the yen has fallen sharply.

All of this good news works best if you ignore that Gap has to compete with all sorts of companies for its customers. As Murphy also pointed out, without good marketing, China has "too many new entrants, too much competition." Guess? has had some success in China and South Korea recently, and last quarter China revenue jumped close to 30%.

Athleta's potential
Apart from the international expansion, Gap is going to focus on expanding its Athleta yogawear line. Last year, the company more than tripled its total store count, from 10 to 35. In 2013, it plans to almost double that number, adding 30 more stores by the end of the year. Of course, Athleta is sitting in second place -- at best -- behind lululemon athletica (NASDAQ: LULU  ) . Lululemon has more than 200 locations, and comparable-store sales are running in the high single digits, even with the company's sourcing problems.

Even with the competition and international challenges, Gap seems well poised to take advantage of the plan that it's laid out. The last pitfall that investors need to watch out for is the problem of multitasking. Gap has a lot of irons in the fire, and other companies have had issues keeping the core in mind as they expand secondary lines and locations. I think management can handle it, and I'm expecting more good things from Gap this year.

Lululemon has the potential to grow its sales by 10 times if it can penetrate its other markets like it has in Canada, but the competitive landscape is starting to increase. Can Lululemon fight off larger retailers and ultimately deliver huge profits for savvy investors? The Motley Fool answers these questions and more in its most in-depth Lululemon research available. Thousands have already claimed their own premium ticker coverage. Gain instant access to your own by clicking here now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2424817, ~/Articles/ArticleHandler.aspx, 9/30/2016 11:27:21 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,331.37 187.92 1.04%
S&P 500 2,170.52 19.39 0.90%
NASD 5,310.11 40.95 0.78%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 11:11 AM
GPS $22.16 Up +0.46 +2.12%
Gap CAPS Rating: **
LULU $60.80 Down -0.19 -0.31%
Lululemon Athletic… CAPS Rating: ***