Investors who have owned stocks since 2016 generally have experienced some big gains. In fact, the SPDR S&P 500 (NYSE: SPY) total return in the past five years is 116.7%. But there is no question some big-name stocks performed better than others along the way.
Gap Struggles: One company that has been a disappointing investment in the past five years is U.S. apparel retailer Gap Inc (NYSE: GPS).
Gap is one of countless brick-and-mortar retailers that have been crushed by Amazon.com, Inc. (NASDAQ: AMZN) and other online retailers in recent years. Unfortunately for Gap investors, the company’s strategy of trying to shrink its way to success has had little success up to this point.
In 2015, Gap closed its Piperlime subsidiary to focus on its core brands. That same year, the company announced it was closing 175 underperforming stores and cutting 250 jobs.
Even prior to the pandemic, Gap was still shrinking. In February 2019, Gap announced it planned to close 230 of its stores over a two-year period as it invests aggressively in its digital sales. It also announced in 2019 it plans to spin-off its Old Navy brand, the company's fastest-growing brand. However, in January 2020, Gap announced it would not be following through on the Old Navy spin-off due to the “cost and complexity” of the deal.
Even after trimming the fat, Gap’s full-year fiscal 2019 same-store sales were down 3%.
At the beginning of 2016, Gap shares were trading at around $24. Gap dropped as low as $17 in early 2016 but found multi-year support at that level.
The stock broke out to as high as $35.68 in early 2018. Unfortunately for investors, it would mark Gap’s high point of the past five years. Gap dropped as low as $24.25 in late 2018 before rebounding as high as $31.29 in early 2019. The stock was back below $20 by mid 2019, and things only got worse from there when the pandemic hit.
Gap In 2021, Beyond: Mall retailers were among the hardest hit in 2020 due to shutdowns and social distancing. Gap shares dropped as low as $5.26 in March 2020 before rebounding to as high as $26.99 in early 2021. Since then, the stock has once again pulled back to around $26.
The silver lining for Gap investors in 2021 is that digital sales growth in the most recent quarter was up 61% and now accounts for 24% of the company’s total sales.
Still, Gap investors who bought five years ago and held on have made virtually no returns during one of the hottest market periods in recent history. In fact, $1,000 in Gap stock bought in 2016 would be worth about $1,085 today, assuming reinvested dividends.
Looking ahead, analysts are expecting more pain ahead for Gap in the next 12 months. The average price target among the 19 analysts covering the stock is $25, suggesting 3.8% downside from current levels.
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