Strength Seen in Gap (GAP): Can Its 7.2% Jump Turn into More Strength?

Gap (GAP) shares ended the last trading session 7.2% higher at $19.13. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 8.4% loss over the past four weeks.

Gap’s stock rally is an extension of its ongoing efforts to strengthen its core brands and expand market share. It continues to make steady progress in revitalizing its brand portfolio. With a focus on cost control and disciplined inventory management, Gap has been benefiting from reduced operating expenses and more effective promotions, which are helping boost margins. These initiatives have already contributed to $300 million in projected annual savings. Looking ahead, the company plans to further streamline marketing spend and optimize technology investments.

For fiscal 2025, Gap expects sales growth of 1–2% over the $15.1 billion posted in fiscal 2024, driven by sustained momentum at Old Navy and Gap, improving stability at Banana Republic, and a gradual recovery at Athleta. In second-quarter fiscal 2025, the company will face a tough comparison due to a 2-point benefit in the prior year from a credit card revenue agreement.

This clothing chain is expected to post quarterly earnings of $0.43 per share in its upcoming report, which represents a year-over-year change of +4.9%. Revenues are expected to be $3.41 billion, up 0.8% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Gap, the consensus EPS estimate for the quarter has been revised 5.9% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on GAP going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Gap is a member of the Zacks Retail - Apparel and Shoes industry. One other stock in the same industry, Nordstrom (JWN), finished the last trading session 2.6% lower at $23.34. JWN has returned -1.8% over the past month.

Nordstrom's consensus EPS estimate for the upcoming report has changed -1% over the past month to -$0.11. Compared to the company's year-ago EPS, this represents a change of +54.2%. Nordstrom currently boasts a Zacks Rank of #1 (Strong Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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