Shares in Gap Inc (NYSE:GPS) shrugged off news of a facility fire and slower sales, and instead closed sharply higher at $26.25, up 15.23%, on strong volume.
The huge opening gap set up the stock for its biggest gain since 2008, leading to speculation that the apparel retailer’s troubles may soon be relegated to history.
Comparable sales fall at Gap Inc (NYSE:GPS)
Though total comparable sales during September declined 3%, they still bettered analysts’ expectations of a 3.6% fall.
Moreover, the sales beat came despite a fire a distribution center in New York, which affected comparable sales at all Gaps’ major brands.
“We are encouraged that Old Navy saw sequentially improved comp momentum, even including the impact of the fire, due to strong product acceptance, particularly in women’s where the balance between fashion and basics is now said to be corrected,” said an analyst at MKM. “This is driving a higher AUR as well as a better than expected merchandise margin.”
Gap Inc (NYSE:GPS) has a rub off effect on other retailers
The Gap numbers, and the leap in its share price, raised hopes that the retail industry may have bottomed out, and that better days may be around for its battered stocks.
In a halo effect, other retailers too did pretty well Friday: Nordstrom, Inc. (NYSE:JWN) was up 1.65%, American Eagle Outfitters (NYSE:AEO) jumped 0.98%, Urban Outfitters, Inc. (NASDAQ:URBN) surged 2.09% and Express, Inc. (NYSE:EXPR) closed in the green by 3.13%.
“We see a potential scenario of the segment producing high single digit comps this winter, aiding the company will turn the corner on leveraging rent and occupancy,” wrote Deutsche analyst Paul Trussell, who upgraded his rating on GAP to Hold from Sell.
Technically strong signal from Gap Inc (NYSE:GPS)
It is interesting that Friday’s high volume leap took Gap through a confluence of the three moving averages (20, 50 and 200 day), adding conviction to the view that this may be a long term change in momentum.