Gap's (NYSE:GPS) Underperformance Might Actually Get Worse

Monday, November 11, 2019 | Steve Anderson
Gap's (NYSE:GPS) Underperformance Might Actually Get Worse

While objectively, we know that retail is still a fairly solid institution all things considered—only about 11 percent of all sales are made online, according to Statista figures—it's not hard to look at Sears continuing to shutter stores, the ruins of K-Mart, or any of a thousand “dead mall” videos on YouTube to know that things have been brighter for brick-and-mortar. New reports suggest that the downside already spotted at The Gap (NYSE:GPS) locations may well continue.

The Gap Widens Between “Right Now” and “Profitability”

It's already one of the worst performers in retail stocks, and in a market that's perhaps best described as “up”, that carries a little extra ominous meaning. Right now, Gap shares are down about 35 percent on the year, and that's in a market where a retail exchange-traded fund (ETF), XRT, is up eight percent for the same time period.

Worse, the Gap also lost its CEO, Art Peck, just a few days ago in a move that sent shares careening downward to lose seven percent of their total value at the time.

Can It Actually Get Worse for The Gap?

Adding these facts together doesn't make a good overall picture. Being one of a few retail stocks that are in decline in an upmarket is bad enough, but being one of a few retail stocks in decline when retail ETFs are up is even worse.

Word from Piper Jaffray chief market technician Craig Johnson, meanwhile, suggests that the Gap may have seen nothing yet.

While talking to CNBC's “Trading Nation” on Friday, Johnson noted “Gap shares are just purely out of fashion at this point in time. You're back to levels you were at in 2016 and 2011, and it doesn't look like there's any indication that a bottom has been made.” Valid point; not only is Gap down about 35 percent on the year, but it's also down better than 50 percent of its highs seen back in March. All it takes to be considered as in a “bear market” is a difference of 20 percent off 52-week highs, which puts Gap somewhere in Jellystone Park chasing picnic baskets.

Johnson further noted that he was not inclined to go “bottom-fishing” until there was “...clear evidence of some sort of trend change starting to unfold with the shares and at this point in time, you don't have that.”

Can The Gap Be Bridged?

Most objective indicators right now suggest that the Gap is looking a lot more like The Endless Crevasse of Horror and Penury. It's selling clothes in a market where there are a growing number of online alternatives geared to do just that. Worse, the Gap is pretty much a mall fixture, and we know what's been going on with malls for some time now. Plans that emerged back in March to spin-off Old Navy and shutter 230 stores—primarily in North America—may have lent the brand some help back then, but don't seem to be doing much good now.

For the Gap to recover, some possibilities emerge. There are a growing number of technological solutions that may help, including augmented reality systems in dressing rooms that allow customers to see what a potential buy looks like on them in a dressing room mirror without having to actually put the item on. That can help augment the customer experience and improve return customer rates, giving the Gap a crucial leg up in the market. Improvements to the loyalty programs can also be helpful here, including building them directly into an app and coordinating them with mobile payment tools. This is a strategy Starbucks has used to great effect in recent months, and retailers, in general, may find that adding convenience and extra value at the same time is a winning formula.

However, with Gap shares plummeting in an overall-up market, and no real signs of the solution in sight, the Gap may ultimately prove too wide to cross. This may leave one more retail store poised to go the way of Sears, K-Mart, and many others before it.

 

 

Featured Article: Equal Weight Rating



7 Lithium Stocks That Will Power the Electric Vehicle Boom

Demand for lithium is set to increase exponentially in the next few years. In fact, according to Statista, demand for lithium may very well double to 820,000 tons in that time. Some of that demand will come from companies that are manufacturing the batteries that we use every day. For example, lithium is an essential component of the batteries that power our mobile devices.

But the real growth will come as the United States goes all-in on electric vehicles (EVs). The Biden administration recently announced plans to have the U.S. government’s fleet of over 600,000 vehicles converted to EVs.

And as you’re aware, EV stocks are in a bubble of some sort at the moment. Some of that is due to the increasing number of companies that went public last year. However, as investors are beginning to realize, not all of these companies will be the next Tesla. In fact, some of these companies may never be successful at bringing an EV to market, at least not at the scale that will be required.

The ones that do make it will need lithium and lots of it. To help you sift through the best lithium stocks to buy, we’ve put together this special presentation.

View the "7 Lithium Stocks That Will Power the Electric Vehicle Boom".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
The Gap (GPS)1.6$32.81+3.2%2.96%-11.24Hold$27.22
Compare These Stocks  Add These Stocks to My Watchlist 

Free Email Newsletter

Complete the form below to receive the latest headlines and analysts' recommendations for your stocks with our free daily email newsletter:

MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security. Learn more.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research. As a bonus to opt-ing into our email newsletters, you will also get a free subscription to the Liberty Through Wealth e-newsletter. You can opt out at any time.