Gap Inc. (GPS) Last Update 9/2/21
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Gap Inc.
Old Navy Stores
Gap Stores
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Gap Inc. Company


  1. Old Navy Stores constitute 54% of the Trefis price estimate for Gap Inc.'s stock.
  2. Gap Stores constitute 35% of the Trefis price estimate for Gap Inc.'s stock.
  3. Banana Republic Stores constitute 9% of the Trefis price estimate for Gap Inc.'s stock.


  1. Gap Tops Estimates in Q1
The retailer saw a serious sales drop in 2020 but has shown encouraging signs in the recent Q1 as vaccine rollouts gained steam. In fact, Gap's total sales in the recent first quarter were up a large 89% year-over-year and even exceeded 2019 levels by 8%. In addition, its comparable sales increased 28% y-o-y and 13% over 2019. In Q1, digital sales grew 61% y-o-y, which also made up 40% of its total sales mix. As usual, Old Navy and Athleta brands posted the company's best performances, growing by 27% and 56%, respectively, as compared to the first quarter of 2019. Thanks to its strong first-quarter results, Gap lifted its full-year adjusted EPS guidance to a range of $1.60 to $1.75, up from $1.20 to $1.35 previously. The company also boosted its annual sales forecast and now expects top-line growth to exceed 20%.

  1. Gap and Banana Republic Divisions Continue To Weigh on the Company
The Gap brand has failed to resonate with customers for years, and this division accounts for a large 25% of total sales. The company has planned to close 350 Gap and Banana Republic locations by 2023, 75% of them by the end of 2021. In Q1, Banana Republic's sales fell 29% and The Gap brand's sales declined 16%.

  1. Strength of Old Navy
The company said it offered 55% more activewear under the Old Navy brand during the quarter, to meet the needs of customers looking for comfortable clothing as they spend more time at home. The company feels the brand remains under-penetrated when compared with its peers, and hence, plans to increase further its store count in the coming years, which should help to increase the revenues. At Gap's investor day, the management set a goal of growing Old Navy's annual sales to $10 billion and Athleta's annual sales to $2 billion by fiscal 2023.



Gap is a global specialty retailer offering clothing, accessories, and personal care products for men, women, and children. It markets its products under the Gap, Old Navy, Banana Republic, Athleta, GapKids, babyGap, and Intermix brands.

Gap operates stores in North America and several countries in Europe and Asia. It is one of the few U.S. apparel retailers who have a decent international presence. The company also sells its products online through web-based stores for each of its brands. The company has recently changed its reporting structure due to its adoption of omnichannel retailing. It no longer reports separate e-commerce revenues but includes them in individual brands' revenues. In addition to this, Gap has franchise agreements with unaffiliated franchisees to operate Gap, Old Navy, and Banana Republic stores in many countries.

The retailer operates three different brands for three main demographics: Old Navy for cost and fashion-conscious teenagers, Gap for young adults, and Banana Republic for more affluent and relatively older customers.


Development of omni-channel platform

An omnichannel platform enables retailers to engage customers irrespective of the shopping channel they prefer. A while back, Gap Inc. launched its ship-from-store service, which allows the fulfillment of online orders through store inventories. This service not only enables the company to offer a greater variety of merchandise over the Internet but also helps it improve delivery responsiveness and store traffic. A couple of years back, Gap Inc. launched “find in store” and “reserve in store” services to enhance its customer service and integrate the digital and store channel. The “find in store” function informs the customers where to find the nearest stores and the “reserve in store” service allows them to reserve up to five items online to try in stores. Since buying clothes is a personal experience and online shopping provides convenience, this offers customers the best of both channels. Encouraged by the pleasing response, the company expanded its “reserve in store” to all Gap Stores in the U.S. in 2014. In addition, it began testing a new order in-store capability later in the year, which gives customers instant access to expanded merchandise offerings over the Internet.

Online retail sales in the U.S. have grown at a rapid pace over the past several years, thanks to growing internet usage in the country. Internet penetration in the U.S. has gone up from 44% in 2000 to 87% in 2020. Furthermore, facilitated by the convenience of constant access, 92% of teens today go online daily, including 24% who are online constantly, according to a study conducted by Pew Research Center. Over half of the teens (aged 13 to 17 years) go online several times a day, aided by the presence of smartphones, which are available to nearly three-quarters of teens. Smartphone usage will only increase in the future, and this will likely result in a steady rise in online sales. This is evidenced by research that predicts.

Efforts to gain market share in the U.S.

While Gap Inc. is consolidating its main brand networks in North America, it is looking at other ways to gain share in the U.S. apparel market. The retailer is relying on smaller brands for this purpose, such as Athleta, Intermix, GapKids, and babyGap, to grow its business in North America. Through Athleta, Gap Inc. offers performance-driven sports apparel and footwear for women. In line with its growth strategy detailed during FY 2019, the company expects store openings to be focused on Athleta and Old Navy, with closures weighted toward Gap and the Banana Republic.

Optimizing Store Fleet

Gap Inc. has continued the process of optimizing its store count, including reducing its exposure to low-productivity stores. The company has also seen an opportunity for increasing the store count of Athleta, Old Navy, and the factory and outlet expressions at the Banana Republic and Gap. Consequently, in FY 2020, the company opened 189 company-operated stores, largely Old Navy and Athleta, while closing 177 stores, primarily Gap and Banana Republic.