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No-Moat Gap Becomes the Latest Clothing Retailer to Report Terrific Q1 Results; Shares Overpriced

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Following similar reports by other apparel and footwear retailers, no-moat Gap greatly outperformed all sales and earnings expectations in 2021’s first quarter. Like many others, it benefited from pent-up demand, government stimulus, and low markdown rates due to low industry inventories. However, we think these factors will fade in importance as the year progresses. Nonetheless, we expect to raise our $22.50 per share fair value estimate by a high-single-digit percentage due to the first-quarter outperformance and renewed momentum in the business. Still, we view Gap’s shares, up sharply over the past year, as overpriced.

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Company Profile

Business Description

Gap retails apparel, accessories, and personal-care products under the Gap, Old Navy, Banana Republic, Athleta, and Intermix brands. Old Navy generates more than half of Gap’s sales. The firm also operates e-commerce sites, outlet stores, and specialty stores under various Gap names. Gap operates about 3,000 stores in North America, Europe, and Asia and franchises about 600 stores in Asia, Europe, Latin America, and other regions. Gap was founded in 1969 and is based in San Francisco.

Contact
Two Folsom Street
San Francisco, CA, 94105
T +1 415 427-0100
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Apr 30, 2021
Fiscal Year End Jan 29, 2022
Stock Type Cyclical
Employees 117,000

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