The Gap Inc. (GPS): The Best Apparel Retailer Is….

Currently beating all expectations and at the peak of its turnaround, The Gap Inc. (NYSE:GPS) is using its assets most effectively of all of these companies. However, American Eagle Outfitters (NYSE:AEO) and The Men’s Wearhouse, Inc. (NYSE:MW), even with different core customers, are very close. Men’s Wearhouse keeps up in Sales/square ft. and beats Gap on Revenue/Employee as well. American Eagle Outfitters, though, is much more efficient, selling 15% more per square ft. than The Gap and achieving 4.24x more sales per employee.

American Eagle deserves a higher valuation

Even so, The Gap Inc. (NYSE:GPS) is selling for 16.27 times earnings and American Eagle Outfitters (NYSE:AEO) is selling for 15.15 times earnings, likely because The Gap is on such a run with its current turnaround. Momentum is fickly. Ultimately, remember that while the Gap is currently more profitable, American Eagle Outfitters seems to be a more efficiently run organization in the long run. It’s more efficient with its employees, its space, and its inventory, so while in the short-term The Gap is getting a lot of attention, it might be worthwhile to take a closer look at American Eagle Outfitters as potentially the true best clothing retailer.

Nikhil Shamapant has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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