Gap (GPS) Q2 Earnings Report Preview: What To Look For

Jabin Bastian /
2023/08/23 12:10 pm EDT

Clothing and accessories retailer The Gap (NYSE:GPS) will be announcing earnings results tomorrow after market close. Here's what investors should know.

Last quarter Gap reported revenues of $3.28 billion, down 5.78% year on year, missing analyst expectations by 0.23%. It was a decent quarter for the company, with revenue coming in in-line with analysts' expectations. Gross margin also improved significantly. 

Is Gap buy or sell heading into the earnings? Read our full analysis here, it's free.

This quarter analysts are expecting Gap's revenue to decline 6.9% year on year to $3.59 billion, improvement on the 8.41% year-over-year decrease in revenue the company had recorded in the same quarter last year. Adjusted earnings are expected to come in at $0.10 per share.

Gap Total Revenue

Majority of analysts covering the company have reconfirmed their estimates over the last thirty days, suggesting they are expecting the business to stay the course heading into the earnings. The company missed Wall St's revenue estimates four times over the last two years.

Looking at Gap's peers in the apparel retailer segment, some of them have already reported Q2 earnings results, giving us a hint of what we can expect. Abercrombie & Fitch delivered top-line growth of 16.2% year on year, beating analyst estimates by 10.8%, and Children's Place reported revenue decline of 9.26% year on year, exceeding estimates by 0.86%. Abercrombie & Fitch was up 17.1% on the results, and Children's Place was flat on the results.

Read our full analysis of Abercrombie & Fitch's results here and Children's Place's results here.

There has been a stampede out of high valuation technology stocks and while some of the apparel retailer stocks have fared somewhat better, they have not been spared, with share price declining 6.13% over the last month. Gap is up 4.18% during the same time, and is heading into the earnings with analysts' average price target of $11.3, compared to share price of $9.62.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.