Three Reasons Gap Deserves a Second Look
As mall-based stores go, company is doing well.
Asian stocks rose overnight. The Hang Seng was up 1.41%. The Nikkei was closed on holiday. European stocks were in positive territory early this morning, too. And here in the US, we're currently trading higher.
Here's what I'm focused on this fine Monday morning:
Gap, Inc. (GPS):
Did you see its third quarter? The chain turned in a profit of $0.44, which was in line with expectations.
But in my opinion, here's the real story:
1. Its gross margins got a nice goose.
2. Comps at Old Navy were up 10%. Granted, it wasn't going up against a tough comparison but it's certainly nice to see.
3. This line from the release got my attention, too: "During the third quarter, the company repurchased approximately 4.1 million shares for $91 million." If you follow my articles, you know how I feel about companies that buy back their shares.
Bottom line: I don't think this is the absolute best play in retail right now. Target (TGT) and Walmart (WMT) are really the apples of my eye. But when it comes to mall-based stores, I think it deserve a second look.
Dr Pepper Snapple (DPS):
I sense this news about the board approving its first dividend and authorizing a share buyback might have gotten lost in all the action on Friday. But it shouldn't have.
The soft-drink industry as a whole is pretty competitive. Head to a local grocery store or restaurant and its easy to see the large number of choices the consumer faces. Plus with the economy still sucking wind, the average Joe isn't eating out as much and dropping coin on such drinks.
But DPS sure seems upbeat. Those aren't things a board does just to make news, so I think the company deserves a look. Additionally, it trades at just 12.6 times the 2010 estimate, which looks pretty cheap, too.
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