Shares of Gap (GPS) gained in morning trading after a Credit Suisse analyst upgraded the stock and raised his price target following the firm's brick-and-mortar real estate analysis. In a note, Credit Suisse cited the closing of about 200 "low quality" stores and improvements in the company's supply chain.

GAP BETTER POSITIONED THAN THOUGHT: Credit Suisse analyst Christian Buss upgraded Gap to Neutral from Underperform and raised his price target for the shares to $30 from $23. In a note to clients, the analyst said his analysis indicates that Gap is better positioned than he thought with the retailer scoring 57.1% versus the group average of 50% through higher scores in the mall exposure and mall quality categories. He views Gap's real estate positioning as attractive. In addition, Buss said he is encouraged by Gap's plans to close roughly 200 low quality Gap and Banana Republic locations and focus on its Old Navy and Athleta brands as well as digital sales.

RECENT ANALYST COMMENTARY: On September 12, Jefferies analyst Randal Konik raised his price target for Gap to $39 and added shares to his firm's Franchise Pick list. With management divulging divisional margins for the first time and allocating capital toward growth brands like Old Navy and Athleta and away from specialty brands like the Gap and Banana Republic, the analyst argued that he sees the market underappreciating pieces of the organization, with his sum-of-the-parts analysis implying 50%-plus upside to the current share price. Investment changes will drive improved stability, predictability and stronger free cash flow, which should lead to upward earnings per share and multiple expansion, Konik contended.

GROWTH PLANS: On September 6, Gap said that over the next three years, it expects to close about 200 underperforming Gap and Banana Republic locations and add about 270 Old Navy, Athleta locations. The company also said it expects Old Navy, a consistent bright spot for the retailer, to exceed $10B and Athleta to exceed $1B in net sales in the "next few years," driven by growth in online and mobile channels, U.S. store expansion, and continued market share leadership in loyalty categories. The company expects about $500M in savings over the next three years by better leveraging its scale.

PEERS: Gap's focus on growth comes amid a slowdown of mall traffic that has hurt many mall-based retailers reflecting a shift to fast-fashion retailers like Zara, Forever 21 and H&M as well as an increase in online shopping on sites such as Amazon (AMZN). While Gap reported upbeat second quarter results in August, other retailers like Macy's (M) and Kohl's (KSS) reported a quarter of declining comp sales, though their EPS and revenue were above analysts' estimates. In addition, J.C. Penney (JCP) reported a larger than expected loss for the quarter, with its comp sales dropping 1.3%. While Urban Outfitters (URBN) reported a quarterly earnings beat, its comp sales declined. Additionally, Nordstrom (JWN) is reportedly nearing a deal to select private equity firm Leonard Green & Partners to help fund a buyout of the department store chain.

PRICE ACTION: Gap increased 1% to $28.21 in morning trading, off earlier highs. Year-to-date, shares are up nearly 26%.