Gap Q2 Earnings: What Are We Watching?

Gap Inc. stock (NYSE: GPS), a specialty retailer selling casual apparel, accessories, and personal care products for men, women, and children under the Gap
GPS
, Old Navy, and Banana Republic brands, is scheduled to report its second-quarter results on Thursday, August 24. We expect Gap’s stock to likely see little to no movement with revenue and earnings matching expectations in fiscal Q2. We expect inflationary headwinds, sluggish sales, and size and assortment problems to continue to negatively impact the company’s second-quarter results. For the full year 2023, Gap continues to anticipate that net sales could decrease in the low-to-mid-single-digit range compared to last year’s net sales of $15.6 billion. As a reminder, the sale of Gap China to Baozun closed on January 31, 2023. That means FY 2022 net sales included approximately $300 million in sales for Gap China. However, Gap’s FY 2023 will include a 53rd week estimated to positively impact net sales by $150 million. It should be noted that a long search has led to the appointment of Richard Dickson as the president and CEO of the specialty apparel company from August 22, 2023.

Notably, GPS stock had a Sharpe Ratio of 0 since early 2017, which is much lower than the figure of 0.6 for the S&P 500 Index over the same period. Compare this with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.