Gap shines despite Old Navy stumble
GAP•Gap raises annual profit forecast on brand strength
Apparel retailer Gap GAP.N raised its annual profit forecast on Thursday, betting on sustained strength at its namesake brand despite ongoing pressure at some of its other labels.
It raised its annual adjusted EPS forecast by 5 cents at both ends to a range of $2.35 to $2.45.
The company also named industry veteran Michael Francis as Old Navy's new CEO.
The median price target of 21 brokerages covering the stock is $27, data compiled by LSEG showed.
Analysts point to product and marketing fixes at Old Navy
BTIG (buy, PT: $27) said the Gap brand continues to drive the business, while Old Navy's weakness appears tied to product and marketing missteps that are already starting to improve.
Jefferies (hold, PT: $24) said Gap's strong brand momentum and profit growth were partly offset by weakness at Old Navy, though improving August trends and new leadership could support a stronger second half.
TD Cowen (buy, PT: $27) said Old Navy's weak quarter was not as bad as investors feared, with early signs that product, pricing and marketing fixes are helping traffic recover.
Morningstar said Gap maintained strong profitability despite weak sales at Old Navy, and believes the brand's issues are fixable through merchandising, marketing and leadership changes.
