Risk Off For Retail

The Gap (GPS) has become a risk factor amid uncertainty about its Old Navy chain in an environment of rising costs, potential consumer weakness and Wall Street’s extreme reluctance to hold retailers that disappoint on their quarterly numbers. I would not be surprised to see earnings guidance drop to $0.50 per share after tonight’s report.

I believe we will see better opportunities in retail in the months ahead . . . for example, I maintain a lot of confidence in Target (TGT) after its own quarterly setback. But holding onto GPS ahead of its numbers no longer makes sense.

Sell GPS. This applies to Inner Circle subscribers as well.