The Gap, Inc. (NYSE: GPS), one of the largest retailers, will report its third quarter fiscal financial results after the market closes on Thursday. The company is expected to report earnings of 78 cents a share, up 8 percent from the same period last year.

The struggling retailer exceeded Wall Street estimates for the second quarter after reporting an EPS of $0.74 and surpassing analyst estimates by 5 cents.

Sales are expected to be reported at $4.04 billion. During the same period last year, the company’s revenue totaled $3.98 billion, up 3 percent from 2012.

At the end of business on Wednesday, the retailer closed at $39.46. Shares are up just one percent this year, well below the nearly 11 percent gain for S&P 500 Index.

Analysts surveyed by Bloomberg have a consensus target price of $42.36.

“Since hitting an annual low of $35.46 in mid-October on the heels of a management shake-up, the shares have rallied 11.3%. Nevertheless, options traders remain unconvinced,” wrote Alex Eppstein, assistant editor at Schaeffer’s Investment Research.

Following CEO Glenn Murphy’s abrupt retirement announcement come February, investors seemed concerned that the incoming chief executive, Art Peck, will not live up to Murphy’s accomplishments. These include cost cutting methods such as closing down over 600 stores and expansion into the digital space and overseas.

Most analysts at Bloomberg see the stock as neutral, with 26 rating is a hold. Ten recommend buying, and only one gives it a sell rating.

Overall, total earnings for 27 retail sector companies in the S&P 500 that have already reported Q3 results are up 1.6 percent on 5.8 percent higher revenues, according to Zacks Investment Research. Of those, 70.4 percent beat earnings estimates and 63 percent were ahead of top-line expectations.

The company currently has a market cap of $17.19 billion.

“While we are impressed with management’s recent and ongoing initiatives to improve the business overall, we believe there are structural issues associated with the company that have contributed to the underperformance over its history,” wrote Howard Rubin, analyst at RBC Capital Markets.

These structural issues include a focus on denim, which hasn’t upped the company’s sales, and constraints with profiting from digital and international operations. The fact that foot traffic into brick and mortar stores has been declining across the board doesn’t help the company either. According to ShopperTrak, store visits have fallen consistently by close to 5% year over year in all the months of the past two years.

For Q3 2013, the company reported an 20 percent increase in online sales.


Earlier this month, it released October and third quarter sales results. Comparable sales for October 2014 were down 3 percent versus a 4 percent increase last year. Comparable sales by global brand for October 2014 were as follows:

  • Gap Global: negative 7 percent versus positive 5 percent last year
  • Banana Republic Global: negative 2 percent versus positive 1 percent last year
  • Old Navy Global: flat versus positive 2 percent last year

Overall, comparable sales in the quarter ended November 1, 2014 declined 2%, compared to 1% increase in the same quarter last year.