Gap Soars After Improved Q2 Guidance, Strong July Sales Results

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Gap

Gap Inc.’s (NYSE:GPS) stock gained roughly 13% Thursday, after the disclosure of its Q2 fiscal 12 and July sales results. [1] For the second quarter, the company reported a 6 % increase in its net sales and a 4% increase in its comparable sales, compared to same period last year. Even more impressive was its July sales results with Gap registering 12% increase in net sales and a 10% increase in its monthly comps compared to July 2011. Additionally, with an improved performance this quarter, Gap raised its second quarter earnings guidance to $0.47 – $0.48, compared with $0.35 for the second quarter last year.

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See our complete analysis for Gap

Gap ends Q2 on a positive note with impressive July results

Gap ended its second quarter on a highly positive note with impressive July sales results. For the month of July, the company registered solid growth in all its channels with two of its core brands Gap North America and Old Navy North America showing comp sales increases of 13% and 12% respectively. Its international business, which until now, has remained an unpredictable business segment for Gap, also registered a healthy comp increase of 4% against a 10% decline in July last year.

We believe the impressive results in this quarter and particularly in July reflects Gap’s focus on improving its product mix and a tight control on its inventories. It hired two top executives such as Tracy Gardner as an adviser to company’s women’s merchandise and Jill Stanton for revitalizing Old Navy, certainly has improved Gap’s product offerings and has catered well to the consumer expectations. And with a tight control on inventory, the company is ensuring that its merchandise remains up to date with the current fashion trends. Additionally, tighter control on its inventory essentially means that Gap can look forward to realizing benefit from decline cotton prices, which should translate into margins improvement going ahead.

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Notes:
  1. Gap reports Q2 sales results, Source: Gap’s IR []