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Gap Inc GPS

Morningstar Rating
$19.09 −0.05 (0.26%)
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Company Report

Gap Struggles to Find Relevance, but Old Navy’s Popularity Provides Hope

We believe Gap’s family of brands lacks an intangible asset or cost advantage that would provide an economic moat. The company has experienced years of inconsistent results and has recently suffered major merchandizing and supply chain woes. Still, Gap has fair liquidity, and we view its Old Navy chain as a solid business. According to Euromonitor, it was the second-largest individual apparel brand by retail sales in the United States in 2023, and, despite ongoing issues, we view Gap’s goal of $10 billion in annual sales for Old Navy (up from about $8.3 billion in 2023) as achievable by the end of this decade. The concept, though, faces considerable competition in the discount apparel space and already has more than 1,250 North America stores, so much of its future growth is expected to come from stores in smaller, unproven markets. As we are wary of the potential of these markets, we do not view Gap’s stated goal of 2,000 Old Navy stores in North America as reasonable. Rather, we forecast it will have just over 1,400 locations in 10 years.

Price vs Fair Value

GPS is trading at a 20% discount.
Price
$19.09
Fair Value
$96.00
Uncertainty
Very High
1-Star Price
$77.00
5-Star Price
$25.00
Economic Moat
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Capital Allocation
Nqczsjdt

Bulls Say, Bears Say

Bulls

According to Euromonitor, Old Navy was the second-largest apparel brand (after Nike) in the U.S. in 2023. It competes in the discount apparel sector, which has been healthier than other areas of apparel retail.

Bears

Athleta has gone from being a bright spot to a source of concern as its recent results have badly trailed those of Lululemon and some other peer brands.

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News

Trading Information

Previous Close Price
$19.14
Day Range
$19.0719.54
52-Week Range
$7.2222.08
Bid/Ask
$19.03 / $19.95
Market Cap
$7.08 Bil
Volume/Avg
16 / 6.9 Mil

Key Statistics

Price/Earnings (Normalized)
105.89
Price/Sales
0.50
Dividend Yield (Trailing)
3.14%
Dividend Yield (Forward)
3.14%
Total Yield
3.14%

Company Profile

Gap retails apparel, accessories, and personal-care products under the Gap, Old Navy, Banana Republic, and Athleta 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 approximately 2,600 stores in North America, Europe, and Asia and franchises more than 900 stores in Asia, Europe, Latin America, and other regions. Gap was founded in 1969 and is based in San Francisco.
Sector
Consumer Cyclical
Industry
Apparel Retail
Stock Style Box
Small Value
Total Number of Employees
95,000

Competitors

Valuation

Metric
GPS
JWN
URBN
Price/Earnings (Normalized)
105.8913.3414.22
Price/Book Value
3.034.361.90
Price/Sales
0.500.220.78
Price/Cash Flow
11.542.926.01
Price/Earnings
GPS
JWN
URBN

Financial Strength

Metric
GPS
JWN
URBN
Quick Ratio
0.430.190.51
Current Ratio
1.391.001.42
Interest Coverage
3.471.93
Quick Ratio
GPS
JWN
URBN

Profitability

Metric
GPS
JWN
URBN
Return on Assets (Normalized)
0.76%4.27%7.79%
Return on Equity (Normalized)
3.67%58.03%15.99%
Return on Invested Capital (Normalized)
1.25%8.90%10.10%
Return on Assets
GPS
JWN
URBN
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Apparel Retail Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
IDEXY
Industria De Diseno Textil SA ADRCkny$138.2 Bil
IDEXF
Industria De Diseno Textil SA Share From SplitLzbm$138.2 Bil
TJX
TJX Companies IncMcjlr$113.0 Bil
FRCOY
Fast Retailing Co Ltd ADRMfsz$88.3 Bil
FRCOF
Fast Retailing Co LtdRxsq$88.3 Bil
LULU
Lululemon Athletica IncYycxgq$57.4 Bil
ROST
Ross Stores IncYkd$49.5 Bil
NXGPY
Next PLC ADRYljflz$13.6 Bil
URBN
Urban Outfitters IncRxmx$4.1 Bil

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