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The Gap Tries to Clad Itself in Earnings Beat

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Retailer aims to find a fit in this economy.

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Minyan Morning Memo

One to watch: I admit to having something of a soft spot for Gap (GPS), since we're both about to turn 40. (They appear to have aged better; I guess it's all in the genes). Thus the company's frequent fashion missteps over the past decade pains me. America's largest specialty apparel retailer is out with earnings after the close. Gap's second quarter EPS is expected to be $0.32, presumably on a GAAP basis. See also Five Reasons Gap Stock is a Perfect Fit.

After it's Khaki clad pomp of the 1990's faded the company reinvented itself more often than Madonna (who memorably appeared in one of its TV ads with Missy Elliott), though with considerably less success. Missteps included a failed experiment to court the 35 and older crowd with a discontinued brand called "Forth and Towne", whose abbreviation was not kind to this expanding cohort.

Most Wall Street analysts rate the shares a hold amid a seemingly endless string of same store sales declines at both its namesake brand and the smaller Banana Republic division, an assessment that's hard to argue with. Still, there are some signs the turnaround at Old Navy is working, the company has an enviable balance sheet and its recently-launched "1969″ line is attracting buzz. While donning denim will always incur the wrath of George, sales of the wardrobe staple have been a sweet spot in a sour economy. And it will get invaluable free advertising from the formerly buttoned down Big Board tomorrow.

What just happened: Stocks rose on vacation volume yesterday after an increase in oil shares gave the market a burst of energy. Both genders had a good day as La-Z-Boy (LZB) rose 8% and Ann Taylor (ANN) shares gained 6.9% on an analyst upgrade. CBS (CBS) finished up 5% on the day 60 Minutes creator Don Hewitt died. Southwest Airlines (LUV) failed to feel the love however, losing 4%. Online music outfit iLike was bought by MySpace in an attempt to gain market share from arch rival Facebook. Could a combination creating iLikeMyFace be in the offing?

What's happening: Asia ended up after bulls returned to China's shop, Shanghai stocks staging their biggest rally since March. Over in Europe equities are higher, helped by the British based miner with a Brazilian name -- Rio Tinto (RTP) is up even as it reported a 65% plunge in first half profit. Here at home equities have opened modestly up, Google (GOOG) gaining after it was added to Goldman's conviction buy list. See Two Ways: Goldman Gives Google a Boost.

What will happen: In economics, at 8:30 AM Eastern initial jobless claims unexpectedly rose, up 15,000 to 576,000, and continuing claims also increased. July leading economic indicators are out at 10:00 AM, as is the Philadelphia Fed Index. We'll be learning about earnings from Aeropostale (ARO), Barnes & Noble (BKS), Brocade (BRCD), Buckle (BKE), Children's Place (PLCE), Dicks Sporting Goods (DKS), Footlocker (FL), GameStop (GME), H.J. Heinz (HNZ), Hormel Foods (HRL), Intuit (INTU), Ross Stores (ROST), Salesforce.com (CRM), Sears (SHLD) and Swatch.

Happenstance: The man who sang "Movin' Out" clearly takes his own advice. Billy Joel is selling two of his high end Hamptons homes for $35 million after separating from wife number three.
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No positions in stocks mentioned.
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