Gap Could Finally Be Turning the Corner

gapAnalysts are now wondering if the worst days for Gap are now behind them. The apparel retailer saw its shares jump by 15% Friday, the biggest jump the stock has had in more than eight years.

This came despite a drop of 3% in September comparable sales that was posted late Thursday by the retailer.

The parent company’s performance of Gap, Banana Republic and Old Navy suggests Gap and many rivals of it including Abercrombie & Fitch could finally be emerging form a long slump in sales created by lost market share to its rivals such as Forever 21 and H&M, along with the shift by shoppers in spending priorities.

One analyst has suggested that following two years of spending by consumers on large ticket items such as remodeling the house, they might refocus some shopping on apparel.

While comparable sales companywide, a metric that takes away an impact from newly opened or recently closes stores, has increased just once over the past 18 months, there was some positive news. The company said that if not for a distribution center fire in August, comparable sales would have remained flat during September.

More encouraging for investors is Old Navy, the biggest brand, looks as if it is returning to normal after a slump that startled everyone earlier in 2015.

Comparable sales for Old Navy, which generates close to 40% of its sales, were up 4%.

For some time, Old Navy was the only bright spot amongst the major brands at Gap but has dropped in recent months after its former chief Stefan Larsson exited last year to take the reins at Ralph Lauren.

A number of analysts on Wall Street raised the possibility Gap would return to strong growth over the short term.

The bullishness also extended to others makers of apparel, as the stock of Abercrombie & Fitch, Chico’s and Ralph Lauren all increased on Friday.

However, one analyst did say Gap was still a distance from improving offerings and winning back the consumer’s favor.

The comparable sales for Gap brands fell 10%, while at Banana Republic, which has struggled each year for the past decade they were down by 9% last month.

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