GPS - Embedded Expectations Analysis - 2019 08 09
The Gap, Inc. (GPS:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with a 21.8x Uniform P/E. At these levels, markets are pricing in expectations for profitability to improve slightly, but management may be concerned about the strength of their Athleta brand, market share, and increasing transit times.Specifically, management is confident larger shipping vessels are leading to longer in-transit times. In addition, they may be exaggerating the strength of Old Navy's brand and business model, and they may lack confidence in their ability to grow their market share in back-to-school sales. Furthermore, management may be exaggerating the opportunities they see in their Athleta brand, and they may be concerned about ongoing promotional pressures. Finally, they may be concerned about ongoing industry headwinds impacting their overall performance, and they may be concerned about the sustainability of recent market share and average spend per customer improvements in their Athleta brand.
The Gap is an apparel retail company. The company provides apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix, and Hill City brands. The company has stores in the U.S., Canada, the U.K., France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico, and has franchise agreements with unaffiliated franchisees to operate Old Navy, Gap, and Banana Republic stores throughout Asia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate stores that sell apparel and related products under the company's brand names.
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