Group 1: Itron, Inc. (ITRI) - Itron is a technology, solutions, and service company with a Zacks Rank 1 [1] - The Zacks Consensus Estimate for Itron's current year earnings has increased by 3.1% over the last 60 days [1] - Itron has a PEG ratio of 0.88, significantly lower than the industry average of 2.98, and possesses a Growth Score of B [1] Group 2: The Gap, Inc. (GAP) - The Gap is an apparel retail company with a Zacks Rank 1 [2] - The Zacks Consensus Estimate for The Gap's current year earnings has increased by 7.5% over the last 60 days [2] - The Gap has a PEG ratio of 1.06 compared to the industry average of 4.16, and also has a Growth Score of B [2] Group 3: nCino, Inc. (NCNO) - nCino is a software-as-a-service company with a Zacks Rank 1 [2] - The Zacks Consensus Estimate for nCino's current year earnings has increased by 7.5% over the last 60 days [2] - nCino has a PEG ratio of 2.07, which is slightly lower than the industry average of 2.22, and possesses a Growth Score of B [3]

The Gap, Inc (GAP) - The company carries a Zacks Rank 1 and has seen a 10.7% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - The company has a PEG ratio of 1.07, significantly lower than the industry average of 4.93 [1] - The company possesses a Growth Score of B [1] nCino, Inc (NCNO) - The company carries a Zacks Rank 1 and has seen a 7.5% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - The company has a PEG ratio of 2.11, slightly lower than the industry average of 2.28 [2] - The company possesses a Growth Score of B [2] Sterling Infrastructure, Inc (STRL) - The company carries a Zacks Rank 1 and has seen a 5.3% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [3] - The company has a PEG ratio of 1.84, slightly lower than the industry average of 1.93 [3] - The company possesses a Growth Score of A [3]

Group 1 - The Gap, Inc. (GAP) has seen a 5.3% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Powell Industries, Inc. (POWL) has experienced a 13% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Xperi Inc. (XPER) has reported a significant 61.1% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Zebra Technologies Corporation (ZBRA) has seen a 10.3% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Great Southern Bancorp, Inc. (GSBC) has experienced a 4.1% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [3]

Group 1: Stock Recommendations - The Gap, Inc. (GAP) has seen a 5.3% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Jackson Financial Inc. (JXN) has experienced a 1.7% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Mach Natural Resources LP (MNR) has recorded a 2.4% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [3] Group 2: Dividend Yields - The Gap, Inc. (GAP) has a dividend yield of 2.4%, significantly higher than the industry average of 0.0% [2] - Jackson Financial Inc. (JXN) has a dividend yield of 2.7%, also above the industry average of 0.0% [3] - Mach Natural Resources LP (MNR) boasts a dividend yield of 21.7%, far exceeding the industry average of 0.0% [4]

Group 1 - Powell Industries, Inc. (POWL) has a Zacks Rank 1 and a 13% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [1] - Mach Natural Resources LP (MNR) holds a Zacks Rank 1 with a 2.4% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [2] - The Gap, Inc. (GAP) also has a Zacks Rank 1 and a 5.3% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [3] Group 2 - Powell Industries has a price-to-earnings ratio (P/E) of 19.96, lower than the industry average of 21.20, and a Value Score of B [1] - Mach Natural Resources has a P/E of 7.67, significantly lower than the S&P average of 24.95, and a Value Score of A [2] - The Gap has a P/E of 12.51, compared to the industry average of 28.00, and a Value Score of A [3]

Financial Performance - Net sales for Q3 fiscal 2024 increased by $62 million, or 2%, compared to Q3 fiscal 2023, primarily driven by a 7% increase in online sales [88][102]. - Gross profit for Q3 fiscal 2024 was $1.64 billion, with a gross margin of 42.7%, up from $1.56 billion and 41.3% in Q3 fiscal 2023 [89][102]. - Operating income for Q3 fiscal 2024 rose to $355 million, compared to $250 million in Q3 fiscal 2023, reflecting improved operational efficiency [89]. - Net income for Q3 fiscal 2024 was $274 million, an increase from $218 million in Q3 fiscal 2023, with diluted earnings per share rising to $0.72 from $0.58 [89]. - Operating expenses for Q3 fiscal 2024 were $1.28 billion, representing 33.4% of net sales, down from 34.7% in Q3 fiscal 2023 [103]. Inventory and Sales Performance - Merchandise inventory decreased by 2% as of Q3 fiscal 2024 compared to Q3 fiscal 2023, indicating effective inventory management [89]. - Comparable sales for Old Navy Global increased by 3% in Q3 fiscal 2024, while Banana Republic Global saw a decline of 1% [98]. Store Operations - The total number of company-operated stores decreased by 47 to 2,544, while franchise stores increased by 121 to 1,059, resulting in a total of 3,603 stores [100]. Tax and Income - The effective income tax rate for Q3 fiscal 2024 was 24.1%, significantly higher than 12.8% in Q3 fiscal 2023, primarily due to changes in valuation allowances [106]. - The effective tax rate for the first three quarters of fiscal 2024 increased compared to the same period in fiscal 2023, primarily due to prior year tax benefits and current year increases in income tax reserves [107]. Cash Flow and Liquidity - As of November 2, 2024, the company had cash and cash equivalents of $1.97 billion and short-term investments of $250 million, with no borrowings under the ABL Facility [110]. - Net cash provided by operating activities increased by $38 million during the first three quarters of fiscal 2024 compared to the same period in fiscal 2023, driven by an increase in net income [114]. - Net cash used for investing activities increased by $373 million during the first three quarters of fiscal 2024, primarily due to $246 million of net purchases of short-term investments [115]. - Free cash flow for the first three quarters of fiscal 2024 was $540 million, compared to $544 million for the same period in fiscal 2023 [120]. - The company’s liquidity sources include cash flows from operating activities, cash and cash equivalents, short-term investments, and Senior Notes totaling $1.5 billion [110]. - The company’s cash flows from financing activities decreased by $323 million during the first three quarters of fiscal 2024, primarily due to repayments of revolving credit facility borrowings in the prior year [116]. - The company believes its existing cash balances and cash flows from operations provide sufficient funds for business operations and capital expenditures over the next 12 months and beyond [113]. Strategic Priorities - Strategic priorities include enhancing omni-channel experiences and integrating sustainability into business practices to support long-term growth [90]. - The company continues to monitor U.S. and global legislative actions related to the OECD's Pillar Two global minimum corporate tax of 15% for potential impacts [108]. Dividends - A dividend of $0.15 per share was paid during the third quarter of fiscal 2024, with the Board authorizing the same amount for the fourth quarter [121].

Financial Data and Key Metrics - Net sales increased by 2% in Q3, with comparable sales up 1% [10] - Gross margin expanded by 140 basis points, reaching 42.7% [12][51] - Operating income was $355 million, with an operating margin of 9.3%, a 270 basis point increase YoY [12][52] - EPS was $0.72, up 24% compared to Q3 last year [13][52] - Inventory levels decreased by 2% YoY, and the company ended the quarter with $2.2 billion in cash [13][54] - Free cash flow year-to-date was $540 million [13][54] Business Line Performance - **Old Navy**: Net sales of $2.2 billion, up 1% YoY, with flat comparable sales. Market share gains for the seventh consecutive quarter [10][47] - **Gap**: Net sales of $899 million, up 1% YoY, with comparable sales up 3%. Fourth consecutive quarter of positive comps [11][48] - **Banana Republic**: Net sales of $469 million, up 2% YoY, with comparable sales down 1%. Men's business remained strong, while women's showed pockets of strength [11][49] - **Athleta**: Net sales of $290 million, up 4% YoY, with comparable sales up 5%. Returned to growth with positive comps [11][50] Market Performance - Old Navy saw double-digit growth in the Active category, which is the largest category in the US apparel industry, valued at $70 billion [16][17] - Gap achieved a share increase in Denim, driven by successful campaigns and collaborations [20][21] - Athleta gained market share and saw significant growth in new followers on TikTok, becoming one of the platform's fastest-growing sportswear retailers [31][32] Strategic Direction and Industry Competition - The company is focused on brand reinvigoration, with Old Navy targeting the Active category and Gap emphasizing trend-right products and cultural relevance [16][19] - Banana Republic is reestablishing itself in the premium lifestyle space, with improvements in product fit and assortment [25][26] - Athleta is focusing on product innovation, marketing, and store experience to drive growth [30][33] - The company is diversifying its sourcing footprint, with China now representing less than 10% of sourcing [37] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's transformation, citing consistent market share gains and improved financial performance [8][9] - The company raised its full-year outlook for sales, gross margin, and operating income growth, expecting net sales growth of 1.5% to 2% YoY [55][56] - Management highlighted the resilience of the supply chain and the ability to navigate challenges such as port strikes and natural disasters [36] Other Important Information - The company paid a dividend of $0.15 per share in Q3 and plans to maintain this dividend in Q4 [55] - The company is testing new store experiences and refreshing its retail footprint, with a focus on enhancing the customer experience [24][105] Q&A Session Summary Question: Weather impact and promotional tone for the holiday season [64] - The company navigated weather-related disruptions, including hurricanes and unseasonably warm weather, which impacted sales by approximately 1% [65] - Promotional strategies remain consistent with previous years, focusing on driving interest and demand while maintaining market share gains [65] Question: SG&A and marketing efficiency [66] - The company has rigorously managed SG&A, achieving $550 million in cost savings over the past two years. The $5.1 billion SG&A target remains unchanged [67] - Marketing efforts are becoming more effective, with a focus on digital and social media platforms to drive consumer engagement [68] Question: Athleta's product progress and Zac Posen's impact [72] - Athleta returned to growth with a 5% comp increase, driven by product improvements and marketing efforts [74] - Zac Posen has contributed to the company's cultural relevance and product execution, with a focus on fit and store refreshes [74] Question: Sustainability of low single-digit comps and ROD leverage [78] - The company is confident in its ability to sustain low single-digit comps, driven by consistent execution of its strategic priorities [78] - ROD leverage is expected to continue with modestly positive sales growth [80] Question: Strategic investments and customer experience [85] - The company is investing in enhancing the customer experience, with a focus on both in-store and online improvements [86] - Each brand is at a different stage of reinvigoration, with Old Navy and Gap leading in market share gains [86] Question: Margin structure and share repurchases [88] - Gross margin expansion is driven by better inventory management and lower promotional activity [90] - The company is evaluating share repurchases as part of its capital allocation strategy, with $476 million remaining under a prior authorization [91] Question: Old Navy's acceleration and priorities for 2025 [93] - Old Navy saw strength in men's and women's categories, with double-digit growth in Active. The brand is targeting further expansion in the Active category for 2025 [94][95] Question: Old Navy's margins and profitability drivers [97] - The company does not disclose brand-specific margins but is proud of overall margin progress, with a 220 basis point expansion expected for the full year [97] Question: Customer demographics and merchandise margin improvement [99] - The company saw share gains from middle and higher-income cohorts, with strong responses to value propositions [100] - Merchandise margin improvement is driven by better inventory management, fewer markdowns, and tighter inventory control [102] Question: Real estate footprint and gross margin outlook [104] - The company is optimizing its retail footprint, with store refreshes and new expressions being tested across brands [105] - Gross margin tailwinds from commodities are largely neutral in the back half of the year, with the company focusing on winning early in the holiday season [106] Question: ROD leverage durability and kids/baby category strategy [110] - ROD leverage is driven by higher online sales and stable ROD costs, with more details on 2025 to be shared later [111] - The kids and baby category was impacted by weather, but the company remains confident in its market leadership and assortment [112]

Thursday, November 21, 2024For the second-straight trading session, market indexes fought off an early sag from a higher pre-market and closed into the green by the closing bell. This week has been a welcome one after last week’s trough — call it the hangover after the election results party. Investors aren’t exactly donning the lampshade again quite yet, but they’re feeling pretty refreshed.The Dow gained +461 points for the session, +1.06%. The S&P 500 grew +38 points, +0.53%, while the Nasdaq was flat: + ...

Financial Performance - Net sales for Q3 FY2024 were $3.8 billion, a 2% increase year-over-year, with comparable sales up 1%[5] - Net income for the quarter was $274 million, with diluted earnings per share of $0.72[6] - Fiscal year 2023 net sales reached $14.9 billion, reflecting a strong performance in the specialty apparel sector[29] - For the 13 weeks ended November 2, 2024, net sales were $3.829 billion, a 1.6% increase from $3.767 billion in the same period last year[32] - The company reported a net income of $638 million for the 39 weeks ended November 2, 2024, compared to $317 million for the same period last year, representing a substantial year-over-year growth[33] Profitability Metrics - Operating margin improved to 9.3%, an increase of 270 basis points compared to the previous year[5] - Gross margin increased to 42.7%, up 140 basis points from last year[5] - Operating income for the 39 weeks ended November 2, 2024, was $853 million, compared to $346 million in the previous year, showcasing enhanced operational efficiency[32] - Gross profit for the 39 weeks ended November 2, 2024, was $4.615 billion, up from $4.103 billion year-over-year, indicating a significant improvement in profitability[32] Cash and Investments - Cash, cash equivalents, and short-term investments reached $2.2 billion, a 64% increase from the prior year[7] - The company’s cash and cash equivalents rose to $1.998 billion at the end of the period, up from $1.379 billion a year earlier, indicating improved liquidity[33] - Free cash flow for the 39 weeks ended November 2, 2024, was $540 million, slightly down from $544 million in the previous year, indicating stable cash generation capabilities[35] Sales Growth and Outlook - The company raised its full-year FY2024 outlook for net sales growth to 1.5% to 2.0% on a 52-week basis[16] - Online sales rose by 7% and accounted for 40% of total net sales[5] - Old Navy's Q3 net sales were $2.2 billion, up 1% year-over-year, while Gap's net sales were $899 million, also up 1%[10][11] - Athleta's Q3 net sales increased by 4% to $290 million, with comparable sales up 5%[14] Store Operations - Old Navy North America has 1,255 store locations as of February 3, 2024, with a total square footage of 19.9 million[39] - Gap North America has 461 store locations after closing 14 stores, resulting in a total square footage of 4.9 million[39] - Banana Republic North America has 393 store locations, having opened 3 new stores and closed 10[39] - The total number of company-operated stores is 2,544, with 29 new openings and 47 closures[39] - The franchise segment has increased to 1,059 locations, with 121 new openings and 60 closures[39] - The total store count across all segments is 3,603, reflecting a net increase of 43 stores[39] - The company has opened a total of 150 new stores across all segments in the last 39 weeks[39] - The total square footage for all stores combined is 30.4 million[39] - Gap Asia has reduced its store count to 125 after closing 9 stores[39] - Athleta North America maintains 270 store locations with 2 new openings and 2 closures[39] Cost Management - Operating expenses as a percentage of net sales decreased to 34.5% for the 13 weeks ended October 28, 2023, from 34.7% in the previous year, highlighting cost management efforts[37] Future Investments - Capital expenditures for FY2024 are projected at approximately $500 million[16] - The company plans to continue investing in technology improvements and store maintenance to drive future growth and operational efficiency[34]

Store Operations and Locations - The company ended fiscal 2023 with 2,562 company-operated stores and 998 franchise store locations[10]. - The company has franchise agreements to operate in about 40 countries worldwide[19]. - The company closed a net of 344 Gap and Banana Republic stores in North America from fiscal 2020 to the end of fiscal 2023[50]. Supply Chain and Sourcing - Approximately 29% of fiscal 2023 purchases, by dollar value, were from factories in Vietnam, and 18% from Indonesia[14]. - The company faces risks related to supply chain disruptions, which could impact inventory availability and sales performance[39]. - The company has implemented strategic initiatives to optimize inventory levels and increase supply chain efficiency, including vendor fabric platforming and in-season demand response[43]. - The company faces risks associated with global sourcing, including potential disruptions from geopolitical instability and supply chain issues[47]. - The company is subject to complex trade and customs laws, which may disrupt its supply chain and increase costs due to tariffs and trade restrictions[49]. Financial Performance - The company reported annual comparable sales fluctuating from a high of 6% in fiscal 2021 to a low of -7% in fiscal 2022[66]. - Gross margins ranged from a high of 39.8% in fiscal 2021 to a low of 34.1% in fiscal 2020[66]. - The company generated net cash from operating activities of $1,532 million in fiscal 2023 and ended with $1,873 million in cash and cash equivalents[69]. - As of February 3, 2024, total outstanding indebtedness was $1.5 billion under the Senior Notes, with $2.2 billion in undrawn commitments available under the ABL Facility[67]. - The company has corporate credit ratings of BB with a negative outlook from Standard & Poor's and Ba3 with a negative outlook from Moody's[71]. Employee and Human Capital Management - As of February 3, 2024, the company had approximately 85,000 employees, with 82% located in the U.S. and 18% outside the U.S.[22]. - Approximately 83% of employees worked in retail locations, 9% in distribution centers, and 8% at headquarters[22]. - The company prioritizes human capital management, focusing on talent development, pay equity, and employee feedback mechanisms[24]. - The company was the first Fortune 500 company to announce equal pay for equal work in 2014 and conducts regular pay equity reviews[24]. - The company invests in employee training through structured programs, including a Retail Academy and a Rotational Management Program[24]. - The Board of Directors oversees human capital management, including policies related to recruitment, retention, and workplace culture[24]. - The company emphasizes health, wellness, and safety, providing financial incentives and training aligned with industry standards[24]. Customer Experience and Marketing - The company is focused on increasing the lifetime value of loyalty members through greater personalization and targeted promotions[10]. - The company aims to enhance customer experience through ongoing supply chain, digital, marketing, and omni-channel initiatives[16]. - The company is investing significantly in omni-channel shopping initiatives, including IT systems and data science, to enhance customer experience[58]. Risks and Challenges - Global economic conditions, including inflation and geopolitical instability, could adversely affect consumer spending and the company's financial performance[35]. - The apparel retail industry is highly competitive, with challenges in responding to changing trends and maintaining brand relevance[36]. - The company has experienced labor shortages in field and distribution center positions, impacting its ability to attract and retain qualified personnel[44]. - The company faces evolving regulations and expectations regarding environmental, social, and governance (ESG) matters, which may increase general and administrative expenses and management time[72]. - Climate change poses inherent risks that could disrupt operations, including increased frequency and severity of weather events, impacting supply chains and consumer spending[73]. - Natural disasters, public health crises, and political instability could adversely affect the company's operations and financial results[74]. - Ongoing military conflicts, such as those between Russia and Ukraine and Israel and Hamas, may lead to supply chain disruptions and increased volatility in foreign exchange rates[77]. - Compliance with changing laws and regulations is critical, as non-compliance could adversely affect the company's financial condition and operations[77]. - The company is subject to various legal proceedings and disputes, which may involve significant expenses and impact financial results[77]. Technology and Innovation - The company is committed to pursuing technology and product innovation that supports sustainability efforts[11]. - The company continues to integrate social and environmental sustainability into business practices to support long-term growth[11]. - The company has engaged in strategic transactions, including transferring its European, Mexico, and China businesses to a partnership model and acquiring two technology companies[51]. Inventory Management - The company maintains a significant amount of inventory, especially prior to the peak holiday selling season[20]. - The company experienced significant impairment charges on delayed or unproductive inventory in 2022[43].