Gap Upgraded On 'Quality Casual' Strategic Focus, Signs Of Stabilization

By Tonya GarciaMarketsMarketWatch Pulse

Gap Inc. was upgraded to neutral from underweight on Thursday at J.P. Morgan, with analysts highlighting the company's "Quality Casual" strategy that is intended to improve in-stock rates and the quality of key items in denim, tees and kids and baby at the Gap chain. The price target was raised to $24 from $21. The company has shortened lead times to eight-to-10 weeks versus the six-to-nine month industry average, so that one-third of merchandise at Gap stores is now produced within the quarter. Old Navy has gained market share for the second straight quarter, with a strong holiday performance building momentum in the first quarter. J.P. Morgan analysts also observed more strategic promotions at the namesake Gap and Banana Republic divisions. Looking forward, J.P. Morgan, using Weather Trends International forecasting, says the weather setup for retail is poised to be the best in more than three years for back-to-school and the beginning of holiday 2017. Gap shares are up 2% in Thursday premarket trading, and up nearly 8% for the year to date. The S&P 500 index is up 4.4% for 2017 so far.

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