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Gap Stock Dives as Old Navy Woes Mount
12 Aug
Summary
- Jefferies downgraded Gap's rating to Hold from Buy.
- Old Navy's purchase consideration declined 13% year-over-year.
- Tougher sales comparisons are expected in the second half of the year.
Jefferies has lowered its rating for Gap shares to Hold from Buy, reflecting growing concerns about the company's performance. The firm's analysis indicates a noticeable decline in trends at the Old Navy brand. Data shows Old Navy's purchase consideration dropped 13% year-over-year and has weakened sequentially over several months, with value scores also decreasing by 3%.
This weakening at Old Navy, alongside a 10% dip in Banana Republic's purchase consideration, suggests uneven momentum across Gap's portfolio. Analyst Corey Tarlowe noted that the second quarter presented the easiest year-over-year sales comparison, with significantly tougher comparisons looming in the third quarter. Despite ongoing brand-building initiatives like a partnership with Hailey Bieber and a successful online rollout of beauty products, their overall financial impact is viewed with caution.
