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Lone Pine Capital Sold Its Stake in The Gap

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Lone Pine sold stake in The Gap

Lone Pine Capital sold its position in The Gap (GPS) in the fourth quarter of 2014. The position had accounted for 3.42% of the fund’s total third quarter portfolio.

GPS has a 0.49% exposure to the Consumer Discretionary Select Sector SPDR Fund ETF (XLY) and a 0.10% exposure to the iShares Russell 1000 Growth ETF (IWF). XLY tracks the performance of 86 stocks in the Consumer category, while IWF tracks the performance of over 675 stocks in the Growth category.

The Gap and its peers Under Armour (UA), VF Corp. (VFC), and Nike (NKE) make up ~5.26% of the SPDR Consumer Discretionary Select Sector ETF (XLY). Follow more updates on these stocks at Market Realist’s Clothing and Apparel page.

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Overview of The Gap

The Gap is a leading global apparel retail company. The company offers apparel, accessories, and personal care products for men, women, and children under The Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix brands. The company operates in the specialty, outlet, online, and franchise channels.

The Gap has stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, and Taiwan. It also has franchise agreements with unaffiliated franchisees to operate The Gap, Banana Republic, and Old Navy stores throughout Asia, Australia, Eastern Europe, Latin America, the Middle East, and Africa.

At the end of fiscal 2014, The Gap had 3,709 store locations in 50 countries, of which 3,280 were company-operated stores. The square footage of the company-operated stores grew 2.4% compared with the end of fiscal 2013.

The Gap’s 4Q14 EPS sees impact from foreign exchange

In February 2015, The Gap declared its 4Q14 results and reported net sales of $4.71 billion, compared with $4.58 billion for 4Q13, an increase of 3%. Excluding currency fluctuations, net sales increased by 5% for 4Q14 on a year-over-year basis. The net income for 4Q14 was $319 million.

The company’s earnings per share (or EPS) grew 10% to $0.75 per share on a diluted basis for 4Q14, compared with $0.68 per share during 4Q13. Excluding the year-over-year impact from foreign exchange, diluted EPS increased around 20% for 4Q14.

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The Gap’s 4Q14 comparable sales grew 2%, compared with 1% in 4Q13. This growth was due to the firm’s biggest global brand, Old Navy, which saw positive comparable sales in all quarters of fiscal 2014. This included an 11% rise in comparable sales during the fourth quarter. The company also expanded its digital and mobile initiatives.

Comparable sales flat for fiscal 2014

For fiscal 2014, The Gap’s net sales grew 2% to $16.44 billion. Its comparable sales for fiscal 2014 were flat as compared with a 2% increase last year.

The Gap also announced an additional $1 billion share repurchase and an increase in its annual dividend per share to $0.92 for fiscal 2015.

February sales down year-over-year

The Gap noted that its sales for the four-week period ending February 28, 2015, were $918 million, down from $929 million for the four-week period ending March 1, 2014. The comparable sales for February 2015 fell 4% versus a 7% decline last year.

The next part of this series will discuss Lone Pine’s exit from Comcast.

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