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Published
Dec 16, 2008
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Friedman downgrades Gap; sees weak 2009 sales

By
Reuters
Published
Dec 16, 2008


Gap winter "new arrival"

Dec 16 (Reuters) - Friedman Billings Ramsey downgraded Gap Inc to "market perform" from "outperform," and said an increasingly difficult economic environment will affect the apparel retailer's revenue growth in 2009.

But since the company reaffirmed its fiscal 2008 earnings outlook earlier this month, fourth-quarter estimates are likely to be achieved, analyst Adrienne Tennant said in a note to clients.

The analyst is concerned about the 2009 financial year, with mall traffic continuing to be under considerable pressure. She does not expect comparable store sales at Gap to grow next year.

"We also believe that it will become increasingly difficult to post upside to consensus estimates in fiscal 2009," Tennant, who has a price target of $14.00 on the company's stock, said.

While traffic at Gap stores has been improving, driven by promotional activity, Tennant said the company's Banana Republic division is "weakening," with higher-end consumers struggling.

Shares of the company, which operates the Gap, Old Navy and Banana Republic chains, closed at $12.85 Monday on the New York Stock Exchange. (Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Anne Pallivathuckal, Pratish Narayanan)

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