News

Gap ( GAP ) is set to post positive sales growth for the second quarter in a row as it attempts to reinvigorate its brands.

On Thursday after market close, the company is expected to post Q2 revenue of $3.63 billion, a 2% year-over-year jump, and earnings per share of $0.40, $0.06 higher than a year ago. Same-store sales are expected to grow nearly 3%.

Old Navy and its namesake Gap brand are expected to drive growth, while Banana Republic sales are expected to come in flat. Its premium lifestyle brand, Athleta, is expected to report falling sales.

CEO Richard Dickson is working on a turnaround of the classic retailer. As part of that, it changed its ticker symbol on the New York Stock Exchange last week.

It's now "GAP" ( GAP ), rather than a nod to the navigation system "GPS" ( GPS ), as Brian Sozzi reported .

"We've spent a lot of time driving our strategic priorities, bringing back financial and operational rigor, enabling us to reinvigorate these brands to the extent that we could revitalize them and be part of the cultural conversation," Dickson, a former COO at toymaker Mattel, told Yahoo Finance.

"Great product, great price, great storytelling, great store experiences. These are all fundamentals that we're working really hard to fix."

Many analysts are looking to see if Gap can still succeed in an environment where consumers are strained.

There is "a continued squeeze of the middle-income consumer," Bernstein analyst Aneesha Sherman told Yahoo Finance.

"It's consumers in the middle who are being hit time and time again by a combination of inflation, student loan repayment, credit card debt, the complete wipeout of pandemic savings, and no improvement in the overall sentiment. Those consumers are now looking for value ... and being more choosy."

"We are all working against a backdrop of macroeconomic uncertainty," Dickson said to Yahoo Finance, adding that while Gap is maintaining caution about how consumers are tracking, "there's always winners in every space."

Morgan Stanley analyst Alex Straton, who has an Overweight rating on shares, sees upside for earnings in the second half of the year, given "incremental confidence" in Dickson's strategy and the turnaround execution.

CFRA analyst Zachary Warring isn't as optimistic, reiterating a Sell rating in a recent note, reflecting "the highly competitive specialty apparel retail market" that's primarily focused on young people, he wrote.

He said "high sensitivity to economic conditions" and the decline of foot traffic malls could also impact the retailer.

Year to date, shares of Gap are up nearly 11%, compared to the S&P 500's ( ^GSPC ) 17% gain.

The earnings breakdown

Here's what Wall Street expects Gap to report, compared to Q2 of last year:

In Q1, the company shared that it expects to end 2024 with revenue growth up slightly on a 52-week basis.

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BrookeDiPalma