GPS – Market expectations are Uniform ROA to remain at current levels, but management is confident in their initiatives, experience, and spin-off costs

• The Gap, Inc. (GPS:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 16.4x Uniform P/E. At these levels, markets are pricing in expectations for profitability to remain at current levels, but management is confident in their specialty channel profitability initiatives, customer experience, and ability to minimize spin-off costs
• Specifically, management is confident in the progress of specialty channel profitability initiatives, the benefits of their share repurchasing efforts, and that Gap specialty store restructuring will improve customer experience. Moreover, they are confident they will not be stalled by Old Navy spin-off issues, and are confident in the closure of unprofitable stores and their ability to minimize inventory write-offs.