(Reuters) -Shares of Gap climbed as much as 22% on Friday after the apparel retailer lifted its full-year sales forecast signaling that its turnaround strategy of bringing in newer styles is starting to work.
The stock has risen nearly 8% this year, building on the 85% surge it saw in 2023 when it brought in former Mattel executive Richard Dickson as its new CEO to revive its struggling business.
Gap now sees annual sales slightly up from last year compared with prior expectations of roughly flat sales.
It has tried to improve its business by introducing more fashionable styles across its brands while ramping up marketing efforts to appeal to picky shoppers, who have otherwise scaled back on non-essential purchases.
“(The CEO’s) personnel, product, and operating changes have already reinvigorated a company that had been floundering for years,” said Morningstar’s David Swartz.
Gap’s eponymous brand posted a 3% comparable sales growth in the first-quarter, while the Old Navy and Athleta banner posted 3% and 5% increases, respectively.
“Just one quarter into the fiscal year, the company raised its annual outlook, a solid sign that green shoots at the brands are taking root,” Telsey Advisory Group’s Dana Telsey said.
The average rating of 20 analysts on Gap is “hold”, with a median price target of $23, according to LSEG data. As many as 10 brokerages lifted their price targets on Friday.
As Gap continues to capitalize on its momentum, the future looks promising for the iconic apparel maker. With a robust turnaround strategy in place, Gap is well-positioned to navigate the challenges of the retail industry and drive sustainable growth in the long run.
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