Gap Inc. fell the most in 16 months amid speculation the biggest U.S. specialty-apparel retailer won’t follow rivals such as American Eagle Outfitters Inc. and Coach Inc. in paying special dividends or accelerating payments this year.
The stock slid 10 percent to $30.94 at the close in New York, the biggest one-day drop since August 2011. The San Francisco-based company trimmed its rally this year to 67 percent relinquishing the sixth-best performer spot in the Standard & Poor’s 500 Index, which it had held through Dec. 3.
“There’s no change in our position as it relates to returning cash to shareholders,” Edie Kissko, a Gap spokeswoman, said in a telephone interview. “Our approach has been to return cash to shareholders through share repurchases and regular dividend disbursements to shareholders. We have a track record of increasing our quarterly dividend as the business results have improved over the years.”
Companies from Oracle Corp. to Costco Wholesale Corp. have announced plans to accelerate dividend payments or pay special dividends ahead of a potential U.S. tax increase next year. The top federal levy on dividends may rise to as much as 43.4 percent from 15 percent as part of the so-called fiscal cliff, consisting of higher taxes and spending cuts. American Eagle, Coach and Guess? Inc. are among retailers that have announced such plans.
Jefferies Group Inc. earlier said Gap shares were declining after a competitor’s note said the company wouldn’t pay a special dividend and may lose market share to Kohl’s Corp.
Gap fell “in response to the view of increased promotional activity from mid-tier department stores” such as Kohl’s and J.C. Penney Co., which share less than 10 percent of Gap’s adult shoppers, Stephanie Wissink, an analyst at Piper Jaffray Cos. in Minneapolis, said in a note today. The company’s holiday season is “on pace with expectations,” and the company is likely to continue returning cash to shareholders through stock buybacks and quarterly dividends, she wrote.
Gap will pay 50 cents per share in dividends for the current fiscal year, an 11 percent increase from the previous year, according to its most recent quarterly filing.