Earnings Preview: Gap, Inc. (GPS)

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Gap Inc. (NYSE:GPS) reports earnings after today’s close, and First Call estimates are $0.19 EPS on $3.7 Billion in revenues.  The coming quarter is expected to post $0.21 EPS on revenues of $3.88 Billion.  The only thing that matters today is the EPS number and guidance, because the quarter revenues are already a known item.

How many quarters of ‘less bad’ can there be?  It disclosed -7% same store sales for July, although its total sales were up 1% on stronger international sales of +11% total and +3% on a comparable store basis.  We already have seen the preliminary retail sales numbers with total company sales being $3.69 Billion.

Analysts still seem mixed to positive on the company, although it looks like average price target is still north of $21.00.  Options traders appear to be braced for a move of up to 4% in either direction.

Gap’s chart is only so-so after it put in a new year low earlier this month during the market malaise.  Shares are actually up almost 15% since then.  It seems that in a tighter credit environment that there are stillmany large pending deals that are not yet considered done and completed, so the hopes for buying an ailing retailer with a $14 Billion market cap are less than they were earlier this year.  We’ll have to see if Glenn Murphy, its new CEO, is going to be able to make a difference to what has turned into a perpetually ailed stock that has defined the term ‘dead money’ for about 4 years.

Jon C. Ogg
August 23, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.