Jim Cramer acknowledges that the trade wars could hurt retailers’ profits. However, he has stock picks for companies in the sector that will survive the crisis well and flourish once the effects of high tariffs subside. At the top of this list is once-troubled Gap Inc. (NYSE: GAP), which has staged a comeback in the last year.
For starters, Cramer commented on CNBC that the “tariff reign of terror is temporary.” That is why some retailers face short-term stock dips. Gap’s recent quarter impressed Cramer. So did the success relatively new CEO Richard Dickson has had growing its four brands: Old Navy, Banana Republic, Athleta, and The Gap.
Cramer’s confidence shows up in the company’s figures. When Gap released its most recent quarterly figures, Dickson said success was long-term after a rough several years of earnings: “We ended the year delivering another successful quarter, exceeding financial expectations and gaining market share for the 8th consecutive quarter.”
Comparable store sales were not impressive, but figures were based on a 53-week year in 2023 and a 52-week year in 2024. On that basis, comparable store sales rose 3% in the fourth quarter. Revenue dipped a fraction to $4.2 billion. However, net income rose to $206 million from $185 billion the year before.
Gap’s outlook for the next year was robust. Net income is expected to rise as much as 2% to $15.1 billion. Operating income is expected to increase as much as 10% to $1.1 billion. Gap released the earnings on March 9, but it was unclear how much trade wars might hurt it, if at all.
Gap shares are down 9% over the past year, while the S&P 500 is up 7%. Bring on the trade wars.
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