Why Gap Earnings (and Guidance) Are So Great

By Chris Lange Updated Jan 12, 2:51AM EST · Published Mar 1, 4:47PM EST

Why Gap Earnings (and Guidance) Are So Great — © Thinkstock

The Gap, Inc. (NYSE: GPS) released fiscal fourth quarter financial results after markets closed Thursday. The company said that it had $0.61 in earnings per share (EPS) on $4.8 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $0.58 in EPS on $4.67 billion in revenue. The same period from last year had $0.51 in EPS on $4.43 billion in revenue.

During the quarter, comparable sales were up 5% compared with an increase of 2% last year. Comparable sales by global brand for the fourth quarter were:

Old Navy Global: positive 9% versus positive 5% last year

Gap Global: flat versus flat last year

Banana Republic Global: positive 1% versus negative 3% last year

Separately, the board of directors approved plans to increase the annual dividend by over 5% to $0.97 per share for fiscal year 2018. Additionally, the board of directors authorized a first quarter fiscal year 2018 dividend of $0.2425 per share, payable on or after May 2, to shareholders of record at the close of business on April 11.

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In terms of the outlook for the 2018 fiscal year, the company expects to see EPS in the range of $2.55 to $2.70, with comparable sales flat to slightly up. There are consensus estimates calling for $2.34 in EPS on $15.74 billion in revenue for the coming year.

On the books, cash and cash equivalents totaled $1.78 billion at the end of the quarter, and was roughly unchanged from the same period last year.

Art Peck, President and CEO of Gap, commented:

Our strong positive comp and margin expansion during the critical holiday quarter affirms our balanced growth strategy. Our outlook for 2018 demonstrates confidence in our strategy and a meaningful step up in earnings capacity for the company.

Shares of Gap closed Thursday at $31.70, with a consensus analyst price target of $31.34 and a 52-week range of $21.02 to $35.68. Following the announcement, the stock was up about 8% at $34.25 in the after-hours session.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.