This post was originally published on this site
Gap Inc. GPS, +7.60% says the highly anticipated Yeezy Gap collection, created in partnership with musician and designer Kanye West, whose label is called Yeezy, will arrive in the first half of this year.
Announced in June 2020, Gap Chief Executive Sonia Syngal said on the late Thursday earnings call that the timing of the collection’s arrival is “the number one question” she’s asked.
The company offered no other details about what’s to come. However, it did elaborate on a number of other measures.
Gap closed 228 Gap and Banana Republic stores shuttered around the world in 2020; the goal had been 225 closures.
For 2021, the company expects to close 100 Gap and Athleta stores around the world, including 75 in North America. Meanwhile, there will be 30 to 40 new Old Navy stores and 20 to 30 new Athleta stores.
See also: Cosmetics brand E.L.F. is partnering with Chipotle on a burrito- and guacamole-inspired makeup line
Fourth-quarter net sales rose 5% at Old Navy and 29% at Athleta, while net sales fell 19% at Gap and 27% at Banana Republic.
The company also said that it is weighing the options for Intermix, the company’s designer apparel chain.
“We’ve undertaken a strategic review of our Intermix business as we continue to focus on our four $1 billion brands to drive a more profitable portfolio,” Chief Financial Officer Katrina O’Connell said on the call.
Gap took a $56 million trademark and long-term asset impairment charge associated with Intermix during the most recent quarter.
Wells Fargo analysts think there’s “a lot to like” about Gap. Analysts rate the company’s stock overweight with a $32 price target.
“Gap is proving that they have two high-growth, high-margin brands that make up 60%+ of their portfolio [Old Navy and Athleta], which can drive consolidated margins higher over time – with additional upside now that Gap brand is showing life for the first time in many years,” analysts led by Ike Boruchow wrote.
See also: Kohl’s says it added 2 million new customers in 2020 due to the Amazon returns program
JPMorgan has identified five catalysts for Gap, including the Yeezy collaboration; a recovery for Banana Republic in the second half of the year as shoppers start looking for outfits to attend events; strategic reviews of both Intermix and the European business; and the upcoming stimulus, which could benefit the Old Navy business. Old Navy’s core shopper has an average household income of $50,000.
“We believe Old Navy is benefiting larger picture from the disproportionate growth of ‘value retail’ (i.e. similar to off-price) and has seen market share gains across numerous categories (denim, dresses, active, kids/baby) with incremental market share dollars up for grabs due to JC Penney’s recent bankruptcy and eventual door closures ($11b in total sales volume).”
JPMorgan rates Gap stock overweight with a $32 price target, up from $30.
UBS analysts are more cautious, maintaining a neutral rating, though raising their price target to $28 from $25.
“Our concern is competing against Amazon, off-price, the mass channel, and
other brands will prove tougher than expected post-reopening. This probably hampers earnings growth and keeps the stock’s P/E stuck in the low-to-mid-teens range,” analysts said.
Gap stock soared 6.7% in Friday trading, and has more than doubled, up 102.8% over the last year.
The S&P 500 index SPX, +1.95% has gained 26.4% over the past 12 months.
