Gap Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of apparel retailer Gap (NYS: GPS) climbed 10% on Thursday after its monthly sales and fourth-quarter guidance topped Wall Street expectations.

So what: Gap's January same-store sales declined 3% on heavy clearances, but it was better than the 4.9% drop that analysts had estimated, suggesting that it is finally building some momentum. It's no secret that Gap has struggled in recent years, but a shakeup in management and the institution of a "Global Creative Center" to improve the design process seems to be taking hold.

Now what: Looking forward, management sees fourth-quarter EPS of $0.41-$0.42, which is well above the consensus of $0.35. "January was largely clearance-based, and we're pleased we successfully cleared holiday inventory," said CEO Glenn Murphy. "As we transition to a new year, our teams are focused on making the necessary steps to improve our business performance in 2012." Jumping on a rally isn't exactly ideal, but with the stock still trading at a clear P/E discount to the industry, Gap might have some decent room to run.

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At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. The Fool owns shares of Gap. Try any of our Foolish newsletter servicesfree for 30 days.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

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