The Gap Inc. (GPS): Which Retailers Should We Buy Now?

For The Gap Inc. (NYSE:GPS), looking forward, it focuses on growing its top line with healthy merchandise margin, managing its costs efficiently, increasing its EPS, and returning excess cash to shareholders. For the full year 2013, Gap expects to open around 160 company-operated stores and close around 80 stores, having around 75 new franchised stores, net of closures.

The company might spend around $675 million in capital expenditure, generating around 13% in operating margin. The diluted EPS for the full year might come in at $2.52 to $2.60 per share. Investors might also be quite excited about The Gap Inc. (NYSE:GPS), as it plans to return as much as $1.3 billion in cash to shareholders in the form of share buybacks and dividends in 2013. Consequently, the total yield could reach nearly 6.4% at its current trading price.

My Foolish take

The Gap Inc. (NYSE:GPS) seems to be a sweet retail company for long-term investors at the current trading price, because of its low valuation, reasonable leverage, high profitability, and the potential to create quite a juicy total yield (dividends + share buybacks) in the near future.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Which Retailers Should We Buy Now? originally appeared on Fool.com.

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