Gap Inc. (NYSE: GAP) reported fiscal 2025 fourth‑quarter net sales of $4.24 billion, up 2 % year‑over‑year, and earnings per share of $0.45, which matched the consensus estimate of $0.45. The company’s comparable sales grew 3 %, marking the eighth consecutive quarter of positive comparable sales growth across its brands. Gross margin fell to 38.1 %, an 80‑basis‑point decline from the prior year, largely attributable to an estimated 200‑basis‑point tariff impact; higher average selling prices and lower discounting partially offset the pressure.
The results were driven by a 7 % increase in Gap brand sales and a 8 % rise in Old Navy comparable sales, while Athleta experienced a modest decline in comparable sales. The company’s operating margin slipped to 7.3 % from 7.5 % in the same quarter a year earlier, reflecting the tariff‑induced margin compression. Management noted that the 200‑basis‑point tariff hit was largely absorbed by pricing power, with an underlying margin expansion of roughly 120 basis points when tariffs are excluded.
Guidance for fiscal 2026 remains largely unchanged. Gap projected first‑quarter revenue of $3.53 billion to $3.57 billion, slightly below the analyst estimate of $3.53 billion, and adjusted diluted EPS of $2.20 to $2.35, a range that is in line with consensus estimates. The company reiterated its full‑year outlook of 2 % to 3 % net sales growth and a 7.3 % to 7.5 % operating margin. Management emphasized that the first quarter of fiscal 2026 would see a 150‑ to 200‑basis‑point decline in gross margin due to tariff headwinds, but a meaningful tailwind is expected in the second half as mitigation actions take effect.
CEO Richard Dickson highlighted the company’s continued transformation, noting that the eighth consecutive quarter of positive comparable sales growth demonstrates resilience amid competitive pressures. He added that the strong cash position of $3 billion and a new $1 billion share‑repurchase authorization reinforce financial flexibility. The guidance signals confidence in maintaining profitability while navigating tariff challenges, but the slightly lower revenue outlook for Q1 2026 reflects caution about near‑term demand uncertainty.
Market reaction to the earnings was muted, with investors focusing on the in‑line EPS and revenue figures, the continued margin compression from tariffs, and the modestly lower Q1 revenue guidance. The company’s ability to keep earnings in line while managing tariff headwinds was viewed positively, but the headwind‑heavy margin outlook tempered enthusiasm for the near‑term outlook.
The content on EveryTicker is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.