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Why Gap, Inc. Stock Dropped Today

By Steve Symington - Jan 8, 2016 at 12:52PM

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The clothing retailer capped a tough year with disappointing December sales. Here's what investors need to know.

What: Shares of Gap (GPS -3.00%) were down 12.6% as of 12:15 p.m. Friday after the clothing and accessories retailer announced disappointing December sales results.

So what: Specifically, Gap revealed that net sales for the five-week period ended January 2, 2016, fell 4% year over year to $2.01 billion, hurt by a 5% decline in comparable-store sales during the month. That includes a 2% drop in comps at Gap, a 7% decline from Old Navy, and a steeper 9% drop from Banana Republic.

Analysts, on average, were expecting consolidated net sales to decline a narrower 3.5%.

Gap CFO Sabrina Simmons added, "As we bring the holiday season to a close, we look forward to delivering new Spring collections across our brands."

Now what: The latest slump caps a difficult year in which GAP stock declined a staggering 41% -- and in which clothing retailers as a whole struggled to to keep pace with consumers' shifting preferences. Worse yet, Old Navy was formerly a bright spot, with comps rising 4% in Gap's most recent quarter, but now the company's declines are proving more broad-based.

If course, this could simply underscore the challenge of difficult year-over-year comparisons and fierce competition in the crucial holiday period, which explains why Simmons prefers to look forward to the coming spring seasons. But for now, I can't blame Gap investors for hanging their shares back up on the rack.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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