Shares of retailer Gap (GPS, Financials) are up 6% after JPMorgan (JPM, Financials) upgraded the stock and raised its price target, citing positive comments made by the company's leaders at a recent meeting.
From "neutral," JPMorgan changed its rating on Gap to "overweight," and raised its price target from $28 to $30. Rather than concentrating only on "fixing fundamentals," the bank's analysts highlighted that CEO Richard Dickson said the firm was at "an inflection point" and headed toward "continuous improvement."
Referred to as the "consistency" plan, Dickson's approach emphasizes improved efficiency measures like inventory management, marketing, and operational savings with investing in growth projects motivated by top-performing brands, said the analysts. Targeting "annual operating margin expansion," CFO Katrina O'Connell said, the business is striving to reach previous levels of profitability.
Both above Wall Street's consensus projections, JPMorgan's report forecasted profits per share of $2.30 for fiscal 2025 and $2.53 for fiscal 2026.
Gap recently disclosed a 2% growth in third-quarter sales, which came to $3.83 billion, and a profit increase to $274 million, or 72 cents per share, from $218 million, or 58 cents per share, in the same time the year before. Supported by a good start to the Christmas season, the business revised its full-year sales projection to now reflect increase between 1.5% and 2%.
Gap Inc. has been rejuvenating its brand image and upgrading its marketing strategy under CEO Richard Dickson, who took on the post in August 2023. Among notable projects include selecting new leadership for Banana Republic and assigning designer Zac Posen as Old Navy's chief creative officer and creative director.
These calculated initiatives have resulted in improvements in market share for every brand store as well as a good start to the Christmas buying season. While Gap gained from softer materials and looser fits, Old Navy saw demand for denim and active lifestyle clothes. Men's clothes outpaced women's despite continuous difficulties at Banana Republic, and thanks to marketing initiatives, Athleta's same-store sales grew.
