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Alberto Abaterusso
Alberto Abaterusso
Articles (1661) 

2 US Apparel Store Stocks Report 2nd-Quarter Results

Gap Inc. misses on earnings, while Ross Stores beats

August 23, 2019 | About:

Two apparel store stocks released earnings results for the second quarter of fiscal 2019 on Thursday after the closing bell.

Shares of Gap Inc. (NYSE:GPS) were down 1.18% to $17.54 in after-hours trading on Thursday after missing consensus on earnings per share by 8 cents. The company posted 44 cents, down 42.1% year-over-year.

Revenue of $4.01 billion, which was 2% lower than the prior-year quarter, fell $10 million short of expectations.

The San Francisco-based apparel stores company saw total comparable sales down 4% in the second quarter of fiscal 2019 versus a 2% increase in the second quarter of fiscal 2018.

Global brand breakdown: Old Navy Global shifted to a 5% decline from 5% increase. Gap Global worsened 200 basis points to a 7% decrease from a 2% decrease. Banana Republic Global switched to a 3% decrease from a 2% increase last year.

Moreover, Gap recorded a 90-basis-point drop in its gross margin to 38.9% of total net sales and a 270-basis-point fall in operating margin to 7% of total net sales.

Looking ahead to full fiscal 2019, Gap sees comparable sales down at a low single-digit rate and forecasts earnings per share to range between $2.05 and $2.15 versus consensus estimates of $2.06.

Shares of Gap Inc. were trading around $17.75 at close on Thursday for a market capitalization of $6.71 billion. The stock has fallen sharply 40% over the 52 weeks through Aug. 22 and is now below the 200-, 100- and 50-day simple moving average lines. The 52-week range is $15.22 to $31.39.

Wall Street issued a hold recommendation rating with an average target price of $20.68 per share of Gap Inc.

Additionally, Gap pays dividends. On Oct. 30, the company will distribute 24.25 cents in cash quarterly dividend per common share with reference to the third quarter of 2019 to shareholders of record Oct. 9. The ex-dividend date is Oct. 8. The payment generates a 5.72% forward dividend yield versus the industry median of 2.98% as of Aug. 22.

Shares of Ross Stores Inc. (NASDAQ:ROST) moved 1.86% lower to $105.40 in after-hours trading on Thursday although the company beat consensus on earnings per share by 3 cents and on revenue by $20 million.

The company reported $1.14 in earnings per share, up 9.6% year-over-year, on revenue of $3.98 billion, reflecting a 6.4% increase from the prior-year quarter.

The California-headquartered apparel company posted a 3% increase in total comparable sales in the second quarter of fiscal 2019 versus a 5% increase in the second quarter of fiscal 2018.

Further, the operating margin was 13.8% of total net sales, slightly down 10 basis points from 13.9% last year.

CEO Barbara Rentler said, however, that the operating margin in the second quarter was better than what the management expected, thanks to favorable timing of expenses that should be reversed in the second half of fiscal 2019.

Looking ahead to full fiscal 2019, Ross Stores sees earnings per share of $4.41 to $4.50 versus $4.51 consensus. The company anticipates 1-2% growth in comparable sales in the third and fourth trimesters.

The company said that its produced its earnings forecasts considering U.S. President Donald Trump’s recent announcement of 10% levies on imports from China.

Shares of Ross Stores were trading around $107.4 at close on Thursday for a market capitalization of $39.17 billion. The stock increased 13% over the 52 weeks through Aug. 22 and is now above the 200-, 100- and 50-day simple moving average lines. The 52-week range is $75.91 to $108.20.

Wall Street issued an overweight recommendation rating with an average target price of $102.95 per share of Ross Stores.

Moreover, Ross Stores distributes dividends. The company will pay 25.5 cents per common share on Sept. 30 to shareholders of record Sept. 12. The ex-dividend date is scheduled for Sept. 11. The payment produces a 0.96% forward dividend yield compared to the industry median of 2.98% as of Aug. 22.

Disclosure: I have no positions in any security mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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