Just when you think you know what to expect from a retailer, they can surprise you out of nowhere. Retailers released a slew of January same-store sales data today, but one of the biggest shocks came from Gap (NYSE:GPS).
Gap has become a perennial struggler when it comes to boosting comps, despite a series of ever-easier comparisons. So the news today that its January comps came in flat (beating analysts' expectations) was probably music to investors' ears. As far as comparisons go, Gap's same-store sales inched up by 1% last January. Net sales this January were $1.19 billion, but bear in mind that those results include an extra week this year; last year's January sales were $955 million.
In a rather abrupt about-face, Gap said it now expects fiscal 2006 earnings of $0.89 per share to $0.91 per share, better than its most recent guidance, disclosed only a month ago, for $0.83 per share to $0.87 per share. (Of course, the improved guidance is still a lot less than the $1.23 to $1.27 per share in earnings Gap had originally guided for in February 2006; at the time, it called those figures "modest.")
I've been a pretty consistent Gap bear over the last year or two, but I must admit I'm glad to hear of Gap's January surprise. Then again, caution's still in order.
Things may very well get better now that Gap's beleaguered CEO, Paul Pressler, has been shown the door. On the other hand, Gap still has a lot of work ahead of it. It's got to find a leader who will keep the company's finances in order, jazz up the merchandise, and lure customers in the door. It's still experiencing a lot of executive defection (announcing today that its North American head designer is leaving), and while that could bring about fresh change, it could also be a detriment. Gap also faces extremely aggressive competitors such as Abercrombie & Fitch (NASDAQ:ANF), American Eagle Outfitters (NASDAQ:AEOS), and J. Crew (NYSE:JCG).
Here's one more Foolish takeaway from this tale: Why oh why do stocks jump -- or tank -- based on a single month's same-store sales? It's the shortest of short-term reactions, and the resulting volatility has given some companies an excuse to stop reporting their comps each month. (Gap shares had increased by about 3% when the news first broke, but they have since settled back down a bit.)
Still, it's nice to see the underdog show signs of life. We shouldn't celebrate too much, though; Gap has a lot of work ahead to get itself back on track.
Try on further Gap-related Foolishness:
- Should Gap go private? Fools recently dueled on the issue.
- Gap showed Paul Pressler the door.
- Nate Parmelee discussed the conundrum for Gap shareholders as buyout rumors flew.
Gap and American Eagle Outfitters are Motley Fool Stock Advisor recommendations. Gap has also been recommended by Motley Fool Inside Value. Whatever your investing style, the Fool has a newsletter for you.
Alyce Lomax doesn't own shares of any of the companies mentioned. The Fool has a disclosure policy.
