Gap Inc. (GPS), one of the leading global specialty retailers, reported a decline of 6.0% in same store sales for the four-week period ended August 27, 2011. Results for the month compared unfavorably with same store sales, which remained flat as of August 28, 2010.
Gap has reported a contraction in same store sales in every segment. The company reported a decline of 4.0% each in Old Navy North America and Banana Republic North America segments compared with negative 1.0% and positive 6.0% growth, respectively, experienced in the prior-year period.
Gap’s North America’s same-store sales inched down 8.0% versus a slight decline of 1.0% in the prior-year period. The company’s same-store sales from the international region witnessed a contraction of 9.0% compared with a growth of 5.0% last year.
Net sales for the four-week period ended August 27, 2011 inched down 2.7% to $1.10 billion compared with net sales of $1.13 billion as of August 28, 2010, primarily due to sluggish performance across all of the company’s businesses in North America.
Year-to-Date Sales
On August 27, 2011, Gap completed 30 weeks of fiscal 2011 and reported a decline of 3.0% in same store sales compared with an increase of 3.0% in the prior-year quarter. Net sales for the period remained almost flat at $7.78 billion compared with net sales of $7.77 billion in the prior-year period.
Gap operates in a highly fragmented market and competes with well-established rivals, such as American Eagle Outfitters Inc. (AEO) and The TJX Companies Inc. (TJX). With a reduction in disposable income and a cut in consumer discretionary spending resulting from the recent economic downturn, the company like all other retailers is under severe stress in order to maintain its performance.
Gap’s shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating. Our long-term recommendation on the stock remains Neutral.
