Gap shares unravel, take biggest hit on S&P 500

Shares of the Gap clothing chain sank nearly 14% Friday, making it the biggest loser in the S&P 500 index, a day after the company reported a decline in March sales that made investors lose faith in the company's prediction of a spring pick up in sales.

Late Thursday, Gap said sales at stores open at least a year fell 6%. The declining sales extended across all of the company's three chains, which include its namesake brand, Old Navy and Banana Republic. Overall revenue fell 6.5% to $1.43 billion for the five weeks ended April 2, down from $1.53 billion, a year earlier.

Gap's news appeared to drag down other retail stocks. L Brands, which operates the Victoria's Secret and Bath and Body Works chains fell 4.4%; Under Armour lost 2%; Coach slipped 3.3%; and Michael Kors Holdings tumbled 4.8%

Gap's management had been touting spring, especially Easter, as the time when the turnaround would come, said analysts Simeon Siegel, Gene Vladimirov and Julie Kim of Nomura, in a note to investors Friday.  "Management was surprised"  that their spring predictions didn't materialize, leaving them with excess inventory, they wrote.

The Nomura analysts also raised questions about whether Gap, with its multiple chains, has become unwieldy. "We do not see a reason to believe the (shopper) traffic is on the verge of returning to the mall in general and wonder if the business may simple be too large in the 'new normal' of retail," they wrote.

Victoria's Secret to cut 200 jobs, restructure

Gap's chief financial officer, Sabrina Simmons, called the month's sales effort “challenging" in a statement, but added, "We remain focused on taking the necessary steps to improve results across the portfolio throughout the year."

Gap shares fell $3.83, or nearly 14%, to close Friday at $23.85.