Gap Shares Sink 11 Percent After Quarterly Results DisappointBy
‘No way to sugarcoat’ Gap brand’s weak results, Jefferies Says
Management should accelerate investment shift away from Gap
There’s “no way to sugarcoat it,” Jefferies analyst Randal Konik wrote in a note. Gap brand results were “just plain disappointing.” The level of impact Gap had on the total company’s gross margin compression was shocking, he said.
Gap Inc. shares fell as much as 11 percent Friday after posting disappointing quarterly results that were weighed down by its namesake brand.
Poor weather didn’t help quarterly results, “but clearly Gap brand remains an issue that needs to be addressed,” according to Konik. He believes management should be more aggressive in its move to cut exposure to Gap and accelerate the investment shift towards Old Navy and Athleta away from Gap brand and Banana Republic.
Konik reduced his price target to $45 from $48, but reaffirmed his buy rating, and said shares should be bought on weakness given strength in the Old Navy brand and confidence that management has the right initiatives in place for a recovery in Gap.