Gap Inc. (NYSE: GPS) reported its fiscal fourth-quarter financial results after the markets closed on Thursday. Earnings were not bad in this report, but guidance kept the stock from advancing. As a result, some analysts issued calls about this retail giant.
The company said it had $0.57 in earnings per share (EPS) on $4.39 billion in revenue. Thomson Reuters consensus estimates called for EPS of $0.57 and $4.46 billion in revenue. The same period from the previous year had $0.75 in EPS on revenue of $4.71 billion.
In terms of fiscal 2016 guidance, the company expects to have EPS in the range of $2.20 to $2.25, and an operating margin of 9.5%. The consensus estimates for the full year call for $2.42 in EPS on $15.86 billion in revenue.
Free cash flow for the fourth quarter totaled $870 million. Also on the books, the company ended fiscal year 2015 with $1.4 billion in cash and cash equivalents, compared to $1.5 billion at the end of the previous year.
Comparable sales fell 7% in this quarter, compared to an increase of 2% in the fourth quarter of last year. In terms of its segment comparable sales results the company had:
- Gap Global had -6% comparable sales versus -5% in the previous year.
- Banana Republic Global had -10% comparable sales.
- Old Navy Global comparable sales were flat compared to a positive 5% from last year.
Merrill Lynch believes that the outlook from this report disappoints. The firm expects deflation to remain a headwind, so Merrill Lynch reiterated an Underperform and $21 price objective. It detailed in its report:
In 2015 the company spent $1.0 billion on buybacks, but we expect a material decline in share repurchases in 2016. Management indicated that it will prioritize debt repayment as a use of cash and the pace of buybacks will decline significantly. We are modeling free cash flow of $839 million, with $377 million cash funding the unchanged $0.92 annual dividend, $400 million used to repay the term loan, and $400 million for share repurchase. Management reaffirmed goals to keep $1.0 to $1.2 billion of cash on hand.
A few other analysts weighed in on Gap:
- Jefferies has a Buy rating and lowered its price target to $34 from $42.
- Wedbush has a Neutral rating and raised its price target to $26 from $25.
- Goldman Sachs has a Neutral rating and lowered its price target from $25 to $24.
- Baird has a Neutral rating and raised the price target to $27 from $26.
- Credit Suisse has an Underperform rating and lowered its price target to $27 from $30.
- S&P Capital IQ maintained a Hold rating with a price target to $28.
Shares of Gap ended last week at $27.23, with a consensus analyst price target of $26.41 and a 52-week trading range of $21.57 to $43.90.
Take Charge of Your Retirement In Just A Few Minutes (Sponsor)
Retirement planning doesn’t have to feel overwhelming. The key is finding expert guidance—and SmartAsset’s simple quiz makes it easier than ever for you to connect with a vetted financial advisor.
Here’s how it works:
- Answer a Few Simple Questions. Tell us a bit about your goals and preferences—it only takes a few minutes!
- Get Matched with Vetted Advisors Our smart tool matches you with up to three pre-screened, vetted advisors who serve your area and are held to a fiduciary standard to act in your best interests. Click here to begin
- Choose Your Fit Review their profiles, schedule an introductory call (or meet in person), and select the advisor who feel is right for you.
Why wait? Start building the retirement you’ve always dreamed of. Click here to get started today!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.