Is it darkest before dawn for Gap Stock?

The company sees declines on all indicators Inventories rose 32% in Q2 The bar is set low as the company pulls its forecast Gap shares pay an annual dividend of 6.38% Finding a new CEO and creating Old Navy are potential upside catalysts

Clothing and apparel retailer The Gap (NYSE:GPS) had a bad year with shares down (-54%) in 2022. The company laid off its last CEO in July after an abyssal crisis. Report on first quarter results and is currently looking for a new CEO. Almost every metric disappointed in the latest Q2 earnings report with sales down (-8%), like-for-like sales down (-10%), online sales down (-6%), commodity margins down 850 basis points while inventories soared 32%. Even Kanye gave them the boot ending their partnership, which wasn't producing well anyway. Gap also withdrew its outlook for 2022 due to uncertain macroeconomic conditions characterized by high inflation, rising logistics costs and falling consumer discretionary spending. The consumer pullback has affected most of the retail sector, as evidenced by warnings from Kohl's (NYSE: KSS), Nordstrom (NYSE: JWN), Target (NYSE: TGT) and Walmart (NYSE: WMT) . Inflation sabotaged 200 basis points while $50 million in airfreight costs further reduced its gross margin by 130 basis points. With all the bad news hitting its stock, the Gap may look like a turnaround game if it really is the darkest point before dawn. The company has set the bar low for expectations in the future by pushing back its expectations. As stocks continue to slide toward pandemic lows, investors must wonder if the worst has been priced in.

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Put a bag on it

On August 25, 2022, Gap released its second quarter fiscal 2022 results for the quarter ending July 2022. The company reported earnings per share (EPS) of $0.08 excluding one-time items compared to consensus analyst estimates for a loss of (-$0.02), a beat of $0.10 per share. Revenue fell (-8%) year-over-year (YoY) to $3.86 billion, beating analyst consensus estimates of $3.82 billion. Old Navy sales fell (-13%) to $2.1 billion. Gap sales fell (-10%) to $881 million. Banana Republic sales increased 9% to $539 million and Athletica sales increased 1% to $344 million. The company withdrew its full-year 2022 outlook, but remains cautiously optimistic as it saw improving sales trends in July ahead of August. Gap Chief Financial Officer Katrina O'Connell said: "After the spike in inflation and rising gasoline prices, which particularly affected low-income consumers in June, we have seen improving trends. sales in July and August, in line with many other retailers. Same-store sales were down 10%, a sequential improvement from the negative 14% comparison in the first quarter, which was negatively impacted by the straddle stimulus measures from the previous year."

Here's what the graphs say

Using rifle charts on weekly and daily time frames provides an accurate view of the landscape for stock GPS. The weekly Rifles chart peaked near the $11.93 Fibonacci (fib) level. Stocks triggered a market structure high (MSH) which overlaps with the weekly