First Albany upgraded Gap (GPS) to buy from neutral.
The retailer posted 20% higher April sales at stores open for at least a year. Analyst Harry Ikenson says he upgraded on a combination of better-than-expected sales and margin improvement. He notes margin improvement comes from more full-priced selling, and improved selling of markdowns. He says April comp-store sales significantly exceeded his 13% to 15% estimate, and the 19 cents to 22 cents earnings per share guidance is significantly above his 9 cents estimate.
Ikenson thinks these results indicate a stronger-than-expected turnaround in business, supported by improving trends in comp-store traffic, conversion rates, and margins. He put his earnings per share estimates and price target are under review.