The Gap (GPS) is down nearly 20% today after it pre-announced unfavorable first-quarter results last night. The company indicated it now expects first-quarter sales to decline at a low-teens to mid-teens rate, compared to previous guidance of a mid-to upper-single-digit decline. The company cited poor execution at Old Navy, and the head of the division, Nancy Green, was removed from the division. While the company did not give profit guidance, I believe they will now lose between $0.25 and $0.30 a share in the quarter due to weak sales and discounts.

Comparisons are easier going forward, and I think the company can be profitable for the year. However, a big part of the investment thesis for GPS was that the value of Old Navy and Athleta alone was greater than the value the stock was trading at. Given the fact Old Navy seems to be in disarray, that thesis seems to be in doubt.

However, I would not sell the stock today. With the company only selling at 0.58X revenues to enterprise value, I would like to wait and see if the company has determined its next steps by the time earnings are released in late May and see if that can drive some improvement in the stock. In the meantime, I would not put fresh money in the stock. For now, hold GPS.

Sonoco Products (SON) reported a first-quarter EPS of $1.85 vs. $1.00 last year, on a 31% increase in revenues. Earnings were even higher than the $1.70 to $1.80 range the company gave in March when they initially raised guidance. SON gave full-year EPS guidance of $5.25 to $5.45 a share. Good pricing and benefits from the Ball Metalpack acquisition are driving the strength in results.

The stock rose to a new 52-week high yesterday before declining today due to the continued market weakness. However, with strong earnings visibility and the stock selling for just 12X this year’s EPS estimates, I look for continued outperformance. Buy SON below $65. My target is $75.