GPS – Market expectations are for Uniform ROA to fall, but management is confident about growth, margins, and e-commerce

• The Gap, Inc. (GPS:USA) currently trades at a discount relative to
  UAFRS-based (Uniform) assets, with a 0.8x Uniform P/B. At these levels, the market has bearish expectations for the firm, but management is confident about their growth, margin improvements, and the success of their e-commerce
  
  

• Specifically, management is confident in the growth of their online business and the recovery trends from coronavirus at Old Navy. They are also confident that 25% of their sales came from e-commerce and that there was a 40% increase in customers migrating to multichannel purchasing. Management is also confident that their active and lounge business generated $2.7bn last year and in the changes in how customers engage with their products and brands. Moreover, they are confident that the main coronavirus pressures are behind them and that they will be able to pivot toward leveraging their advantages and accelerating initiatives. Finally, they are confident in a potential resolution with landlords over suspended rent, and the potential to improve gross margins