Gap Inc.’s stock climbed by more than 7% on Monday after JPMorgan Chase analyst Matthew R. Boss upgraded the retailer’s shares from “neutral” to “overweight.”
Boss also increased the price target for Gap’s stock from $28 to $30, citing successful brand revitalization efforts under CEO Richard Dickson.
Boss’s report highlights the company’s four consecutive quarters of revenue growth and strengthened market share as key factors in his optimistic outlook.
Dickson’s leadership drives transformation
Since taking the helm roughly 1.5 years ago, Dickson has implemented a strategic framework across Gap’s brands, prioritizing financial discipline, trend-right product offerings, and a revitalized company culture.
Boss described Dickson’s approach as a “proven playbook” built around creating compelling brand stories, refining the in-store and online experience, and enhancing marketing strategies to foster customer engagement.
The company’s Give Your Gift holiday campaign, which focuses on delivering meaningful gifting solutions, has been well-received by shoppers, exemplifying the effectiveness of Dickson’s strategy.
Holiday season off to a strong start
According to Boss, Gap’s 2024 holiday season has shown promising early momentum.
Comparable-store sales trends improved in the first half of November, aided by cooler weather and a sharp focus on merchandising and marketing.
Dickson, along with Gap’s Chief Financial Officer Katrina O’Connell, has forecast a 1% to 2% revenue increase for the fourth quarter.
Additionally, the company aims for low-to-mid single-digit sales growth in subsequent quarters as part of its longer-term strategy.
Brand-specific strategies yield results
Gap’s individual brands have also contributed to the retailer’s resurgence:
Old Navy: The brand has introduced enhanced store visuals, holiday-themed displays, and its popular Jingle Jammies collection, all of which have boosted foot traffic and sales.
Banana Republic: Efforts to reposition the brand include expanded shelf space for essential apparel, a better balance of pricing in women’s wear, and an emphasis on premium materials like cashmere.
The brand is also channeling more resources into social and influencer marketing to connect with a broader audience.
Athleta: Positioned as a growth driver, Athleta continues to attract consumers with its premium activewear and lifestyle offerings.
Gap brand: Strategic marketing campaigns, collaborations, and customer engagement initiatives have reinvigorated the core brand.
Optimistic outlook through 2025 and beyond
Boss projects companywide same-store sales growth of at least 6% into fiscal 2025/26.
He has revised his fiscal 2025 adjusted profit estimate for Gap to $2.30 per share, surpassing the FactSet consensus of $2.14.
This forecast is driven by expectations of 3.1% revenue growth by 2026 and a widened operating margin of 7.9%, exceeding earlier projections of 7.6%.
Gap’s stock has risen 22.3% year-to-date, reflecting investor optimism about Dickson’s leadership and the company’s ability to navigate a competitive retail landscape.
By comparison, the S&P 500 has gained 26.7% in 2024, underscoring Gap’s strong recovery trajectory.
Boss’s assessment highlights a compelling turnaround story, with Gap’s leadership well-positioned to sustain growth and navigate future challenges effectively.
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