J.P. Morgan downgraded Gap shares to underweight Thursday, predicting the clothier could face profit pressure throughout the holiday season as it struggles with operational issues and skewed inventory.

"The time frame for Gap banner sequential SSS [same-store sales] improvement and return to 'momentum' is now less certain in our view as the brand grapples with operational issues and second-half assortment imbalance (bottoms > tops) with the new brand president unlikely to have material impact until the first half of 2019," analyst Matthew Boss said in a note.

Shares of Gap closed 5.7 percent following the J.P. Morgan downgrade, posting their worst day since August.

Boss cut his December 2019 price target on Gap to $24 from $30, implying 11 percent downside from Wednesday's close. The analyst lowered his fiscal 2019 earnings per share estimate to $2.38, or 12 percent below Street consensus.

A same-store sales deceleration of 250 basis points in fiscal 2018 also leaves the company exposed to rising transportation costs, elevated wages and tariffs, Boss said.

"Direct sourcing exposure to China stands at 22 percent, while Gap is currently working with vendors to pivot sourcing strategies, but noted a costly multi-year timeline for change given size/scale and specialization," the analyst wrote.

"Taking a closer look at wage inflation — Gap last raised its company-wide minimum wage to $10 in 2015," he added. "Management estimates about 70 percent of Gap's stores are at or above the market rate for employees today noting distribution center wages have seen inflationary pressure with the recent announcement from Amazon to increase wages to $15."