The Gap, Inc. GPS is scheduled to report first-quarter fiscal 2023 numbers on May 25.
The Zacks Consensus Estimate for the fiscal first-quarter bottom line is pegged at a loss of 17 cents per share, suggesting 61.4% growth from the prior-year quarter’s actual. The consensus estimate for the fiscal first-quarter loss has widened by a penny in the past seven days. For revenues, the consensus mark is pegged at $3.3 billion, indicating a 5.4% decline from that reported in the year-ago quarter.
In the last reported quarter, Gap’s earnings missed the Zacks Consensus Estimate by 27.1%. The company delivered an earnings surprise of 905.7%, on average, in the trailing four quarters.
The Gap, Inc. Price and EPS Surprise
The Gap, Inc. price-eps-surprise | The Gap, Inc. Quote
Key Factors to Note
Gap has long been gaining from continued momentum across its Athleta brand. The Athleta brand’s value-driven active and lifestyle categories, increased digital marketing investments, and focus on product strategy have been aiding sales. Increased focus on performance active, as well as active lifestyle products to capitalize on the evolving shopping trends, bodes well.
The company has been aggressively undertaking cost-management actions, which are expected to have improved its performance in the to-be-reported quarter. Some notable efforts were increasing spans of control and decreasing management layers to improve the quality and speed of decision-making, as well as creating a consistent organizational structure across all four brands.
Gap has been on track with the execution of its Power Plan 2023, which focuses on opening highly profitable Old Navy and Athleta stores, while closing the underperforming Gap and Banana Republic stores. As part of the plan, the company expects the Old Navy and Athleta brands to contribute about 70% of sales by 2023.
In its last earnings report, GPS expected year-over-year gross margin expansions for the fiscal first quarter, in line with our estimate. SG&A expenses were predicted to be $1.2 billion in the fiscal first quarter compared with our estimate of $1.29 billion.
However, Gap has been reeling under inflationary pressure and drab demand. In its last earnings report, management expected first-quarter fiscal 2023 sales to decline in the mid-single-digit range, whereas it reported $3.5 billion in the prior-year quarter. Also, rising prices of essential commodities are likely to have hurt lower-income consumers' spending on non-essentials like apparel.
Our proven model conclusively predicts an earnings beat for Gap this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Gap has a Zacks Rank #3 and an Earnings ESP of +9.48%.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies that have the right combination of elements to post an earnings beat this time around:
Ulta Beauty ULTA currently has an Earnings ESP of +0.66% and a Zacks Rank of #3. The company is likely to register an increase in the bottom line when it reports first-quarter fiscal 2023 results. The Zacks Consensus Estimate for the quarterly earnings per share of $6.81 suggests an increase of 8.1% from the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ulta Beauty’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $2.62 billion, which suggests an increase of 11.5% from the figure reported in the prior-year quarter. ULTA delivered an earnings beat of 26.2%, on average, in the trailing four quarters.
DICK'S Sporting Goods DKS currently has an Earnings ESP of +2.15% and a Zacks Rank #3. The company is expected to register an increase in the bottom line when it reports first-quarter 2023 results. The Zacks Consensus Estimate for quarterly earnings per share of $3.21 suggests an increase of 12.6% from the year-ago quarter.
DICK'S Sporting Goods’ top line is anticipated to have risen year over year. The consensus mark for revenues is pegged at $2.83 billion, indicating an increase of 4.7% from the figure reported in the year-ago quarter. DKS has a trailing four-quarter earnings surprise of 10%, on average.
American Eagle Outfitters AEO currently has an Earnings ESP of +9.81% and a Zacks Rank of 3. The company is expected to register bottom-line growth when it reports first-quarter fiscal 2023 results. The Zacks Consensus Estimate for quarterly earnings per share of 17 cents suggests an increase of 6.3% from the year-ago quarter’s actual.
American Eagle Outfitters’ top line is anticipated to rise year over year. The consensus mark for revenues is pegged at $1.06 billion, indicating an increase of 0.8% from the figure reported in the year-ago quarter.
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