VV Shots The Gap Inc. ( NYSE: GPS ) is one of the largest fashion retailers in the US. The company has more than 2,500 directly managed stores and 1,000 licensee-operated stores.
This article covers the company's 1Q24 results and earnings call . The company posted 3% comparable sales growth, close to 600 basis points of operating margin expansion, reaching EPS of $0.41, compared to a loss last year.
More importantly, the company showed significant margin recovery and improved comparable sales across all its brands. The market liked the results, with the stock rising close to 30% the day after the release. Given this is the first time I write about The Gap, I also provide my assessment of the positive and negative characteristics of the company.
The Gap is a company with significant potential, undergoing a successful turnaround process, with a lot of brand equity, and investing in growing those brands. At the same time, it is a company that has faced TAM limitations in the past and has struggled to grow for more than ten years. Finally, I evaluate the company's stock as an opportunity.
Despite some of the company's positive characteristics compared to peers, its valuation is high for an apparel retailer which has shown limits to growth. For that reason, the stock is not an opportunity and I rate it a Hold. Positive 1Q24 results The Gap's earnings were very positively received by the market, with the stock jumping 30% in a single day.
The reason behind this excitement is that t.