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.
The #1 Thing to Do Before You Claim Social Security (Sponsor)
Choosing the right (or wrong) time to claim Social Security can dramatically change your retirement. So, before making one of the biggest decisions of your financial life, it’s a smart idea to get an extra set of eyes on your complete financial situation.
A financial advisor can help you decide the right Social Security option for you and your family. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.
Click here to match with up to 3 financial pros who would be excited to help you optimize your Social Security outcomes.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.