Hot Retail stock to watch: Gap Inc (NYSE: GPS)

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Gap Inc (NYSE: GPS) stock rose over 7% on 8th June, 2020 (as of 11:39 am GMT-4; Source: Google finance) on overall economic revival hopes, despite an expected weak first quarter of FY 20 performance.

The company has reported a net loss of $932 million compared to a profit of $227 million, a year ago. Gap has ended the first quarter with $2.2 billion in merchandise inventory, down about 1% from a year ago. The company had $1.1 billion in cash, cash equivalents and short-term investments on hand, compared with $1.7 billion at the beginning of the quarter. Gap has not provided a 2020 financial outlook due to uncertainty aroused by the pandemic.

Meanwhile, in May, the sales continued to decline, after the first quarter ended, but the company posted online growth of more than 100% during the month. The company’s e-commerce sales were up 13% year over year during the first quarter. Currently, more than 1,500 stores are back open for business in North America, which is about 55% of the company’s base and is ahead of schedule. The company is planning to have most of its stores reopened this month and has reopened stores of averaging sales of about 70% their normal levels, with the Old Navy brand driving that rebound. However, 20 of Gap’s stores have posted sustained “extensive damage” on the back of the looting that has broken out amid nationwide protests for the death of George Floyd. The company is working to get those locations back open as quickly, and safely, as possible.

Moreover, during the quarter, Sales for Gap’s namesake brand had declined by 50%, while Old Navy sales had fallen down 42%, Banana Republic sales declined 47%, and Athleta sales fell by 8%. Athleta, which sells workout gear such as leggings and sports bras for women, posted growth of 49% online, the company said. Old Navy, a value-oriented apparel brand for families, saw online sales increasing by 20%. Banana Republic’s online business had fallen 2% during the quarter, while Gap’s digital revenue declined 5%.

GPS in the first quarter of FY 20 has reported the adjusted loss per share of $2.51, missing the analysts’ estimates for the adjusted loss per share of 67 cents, according to Refinitiv data. The company had reported 43 percent fall in the adjusted revenue to $2.11 billion in the first quarter of FY 20, missing the analysts’ estimates for revenue of $2.3 billion. The company did not gave out its same-store sales on the back of the temporary store closures.

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