In a remarkable feat, Gap Inc., the American apparel retailer, witnessed a remarkable surge of about 28% in their stock prices on Friday. This surge comes in the wake of the company raising its full-year sales target, indicating that its efforts to revitalize the business have started to bear fruit.

The stock is currently on track to achieve its biggest one-day percentage gain since November and has already risen by over 37% this year, including Friday's gains. Notably, Gap experienced an impressive growth of over 85% in 2023.

Gap's upgraded outlook is giving Wall Street fresh confidence in CEO Richard Dickson's turnaround strategy. Since joining the struggling mall retailer from Mattel less than a year ago, Dickson has focused on introducing trendier styles across Gap's brands and ramping up marketing efforts to attract discerning shoppers. Morningstar analyst David Swartz believes that Dickson's personnel, product, and operational changes have already reinvigorated a company that had been floundering for years.

The owner of Banana Republic, Gap now anticipates annual sales to be slightly higher than last year, compared to previous expectations of flat sales. In the first quarter, Gap's eponymous brand saw a growth of 3% in comparable sales, while Old Navy and Athleta witnessed 3% and 5% increases, respectively.

Industry analysts are optimistic about Gap's turnaround plan. Emarketer analyst Zak Stambor asserts that, while it is still early days, the Gap brand feels fresh again, being on-trend and gaining cultural cache.

As per LSEG data, the average rating of 20 analysts on Gap's stock is "hold," with a median price target of $23. On Friday, up to 10 brokerages increased their price targets, reflecting a positive outlook. Gap's current stock price stands at $28.65.

According to LSEG, Gap's median price-to-earnings multiple (P/E) for the next 12 months, a common benchmark for valuing stocks, is approximately 15, below its two-year average of 17. This compares favorably to the industry median PE of about 13.

Recent results from retailers such as Walmart, Target, and Abercrombie & Fitch, along with Gap's peer group, have indicated a resurgence in apparel demand after a slowdown last year. In this competitive market where consumers remain exceedingly selective, Gap has managed to gain market share, noted Mari Shor, an equity analyst at Columbia Threadneedle Investments.

With these positive developments and the evident success of its turnaround strategy, Gap is poised for a promising future.