Reuters

(Reuters)

Gap Shares Plummet on Disappointing Spring

Retail Reuters

Shares of Gap Inc slumped 13 percent to a more than four-year low on Tuesday after fewer shoppers visiting the company's stores in the key spring season resulted in a steep decline in comparable-store sales.

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The 47-year old company has struggled in the past few quarters as a series of fashion misses turned off shoppers amid increasing competition from retailers such as H&M, Forever 21 and Inditex's Zara.

Gap Chief Executive Art Peck, who took the helm last year, had repeatedly asked Wall Street for patience, promising that the company's spring season - which he dubbed the "no excuses moment" - would witness a revival in the apparel retailer's fortunes.

Overall sales at established stores fell 5 percent in the quarter ended April 30. Analysts on average had expected a decline of 2.6 percent, according to research firm Consensus Metrix.

San Francisco-based Gap on Monday also gave a grim estimate for its first-quarter profit. The company is expected to report results for the quarter on May 19.

Gap's shares were down 12.5 percent at $19.09 in morning trading. The stock is now trading at levels last seen in early 2012, when Gap emerged from a largely successful turnaround under former CEO Glenn Murphy.

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"GPS expected the spring collection to be a turning point, but we believe structural challenges continue to eclipse any product and design enhancement," Credit Suisse analyst Christian Buss said in a note.

Buss, who has an "underperform" rating on the stock, cut his price target to $27 from $21.

"We expect earnings to remain under pressure until the company makes clear advances toward enhancing supply chain capabilities and addressing fundamental pricing issues."

Gap, like other traditional apparel chains, are grappling with a drop in mall traffic as more people shop online. As well, a growing trend called 'fast-fashion' - stores producing cheaper versions of runway trends within weeks - has eaten into their market shares.

(Reporting by Siddharth Cavale and Subrat Patnaik in Bengaluru; Editing by Sayantani Ghosh)

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