Shares of Gap Inc. on Tuesday fell to their lowest intraday trading price in more than four years, despite an upgrade of the stock by CL King & Assoc. to “neutral” from “underperform,” based on valuation.
While stock in Gap rose 0.12 percent to close at $16.03, in trading on the New York Stock Exchange, shares at one point fell to $15.77, their lowest trading price since April 2003. Nearly 14.3 million shares changed hands, compared with a three-month average volume of nearly 7.2 million.
“At this valuation, we believe it is best to monitor the progress the company may or may not make with its new leadership, new season of merchandise and expense reductions,” CL King analyst Mark K. Montagna said in a research note.
At the same time, Montagna noted that Gap’s buyout buzz, which may have bloated the stock’s valuation, is over.
“Gap Inc. has not been a takeout candidate since Robert Fisher [then acting chief executive officer] squelched such speculation on the [fourth-quarter, fiscal year 2006] earnings call,” Montagna said. “The froth related to takeover speculation has long dissipated and should be fully removed with the weakened private equity environment.”
The retailer, which operates Gap, Banana Republic and Old Navy, has struggled in recent years to attract customers, especially to its Gap nameplate stores.
In January, the company ousted Paul Pressler as its ceo. Last month, Gap named Glenn Murphy, who was the ceo of Shoppers Drug Mart Inc., the largest drugstore chain in Canada, to the post. Gap previously said it was searching for an executive with “deep retailing and merchandising experience, ideally in apparel.”
A.G. Edwards analyst Robert Buchanan rates Gap shares at “sell.”
“I’m also concerned about the new ceo’s lack of fashion background, and I hardly think this difficult situation at the Gap lends itself to on-the-job training,” Buchanan said. “Retailing to me is all about momentum. When you get behind like the Gap has on several years of poor performance, I don’t think you’re likely to catch up.”