Gap’s turnaround has now come to fruition, with the company now seeing strong comparable sales for its namesake brand and Old Navy.
- Gap’s quarterly net sales increased 2% to $4.24 billion, compared with Wall Street estimates of $4.23 billion.
- CEO Richard Dickson said the Gap brand is once again bridging the generation gap, continuing to attract Gen Z while growing its core customer.
- The company forecast fiscal 2026 adjusted earnings per share to be between $2.20 and to $2.35, compared with Wall Street expectations of $2.32.
Gap Inc. CEO Richard Dickson said the apparel maker was “winning across all income cohorts” and is betting on the company’s growth as more of a “pop culture brand” to attract shoppers, even as U.S. tariffs pressured its annual profit outlook and sent shares tumbling more than 6% in after-market trading.
Dickson was hired to turn around the struggling retailer, and after more than two years in the role, he has helped revive culturally significant brands such as Old Navy and the company’s namesake, Gap. He reduced inventory, restocked stores with trend-driven, in-demand items, invested in marketing, and launched a beauty line to attract younger consumers and stay relevant. A few years later, Old Navy and Gap have delivered consistent growth, while turnaround efforts at Banana Republic and Athleta are gaining traction.
A Pop Culture Brand
“Gap at its best is a true original, a pop culture brand that celebrates individuality, united through music, genres, and collaborations that bridge generations and cultures,” Dickson said during a post-earnings call.
“From red carpet moments, most recently dressing Leon Thomas for the Grammys and Claire Danes for the Golden Globes, to co-hosting a star-studded Super Bowl event in San Francisco, to spotlighting emerging artists from Tyla and Troye Sivan to KATSEYE and Sienna Spiro, Gap is showing up in culture in ways that are authentic and relevant,” Dickson said.
He added that the Gap brand is once again bridging the generation gap, continuing to attract Gen Z while growing its core customer. “That multi-generational appeal is showing up in the results,” Dickson said.
Dickson noted that Old Navy has also continued to evolve its media mix model to meet consumers where they are. “Growing its presence on social media platforms and significantly increasing creator volume with over 15,000 creators in the fourth quarter, almost 3x the number of creators last year,” he said.
U.S. Tariffs Continue To Pinch
The company forecast fiscal 2026 adjusted earnings per share to be between $2.20 and to $2.35, compared with Wall Street expectations of $2.32, according to data compiled by Fiscal AI.
CFO Katrina O’Connell said that tariffs influenced last year’s gross and operating margins by approximately 120 basis points and affected the fourth quarter gross and operating margins by nearly 200 basis points. The company’s fourth-quarter earnings per share came in at $0.45, in line with expectations.
“I want to note that our guidance today reflects tariff rates under the IEEPA regime and therefore does not contemplate the recently announced Supreme Court ruling and subsequent Section 122 announcement,” O’Connell said.
Last week, global tariffs introduced by U.S. President Donald Trump took effect at a reduced 10% rate after the Supreme Court of the United States blocked the broader measures.
Wall Street Appreciates Growth
“When one or two quarters of growth appear, they can be dismissed as a fluke. Three or four, and the question is whether the momentum will hold,” Neil Saunders of GlobalData said, adding that when eight consecutive quarters of comparable sales growth present a clear pattern, “and in this case, the pattern points to the fact that Gap’s recovery has taken root.”
Gap’s quarterly net sales increased 2% to $4.24 billion, compared with Wall Street estimates of $4.23 billion. “This was our second quarter of meaningfully pulling back discounting driven by on-trend product and strong brand heat,” Dickson said.
“With a focus on elevating the customer shopping experience, new store models continue to outperform the fleet, giving us confidence in the opportunity to accelerate these formats in 2026,” he said. The company expects annual sales to be up 2% to 3% year-over-year.
“A comparable sales uplift of 7% in the final quarter (for Gap brand) – matching the progress made in the third quarter – is an extraordinary result for a brand that had once been written off, and which is trying to reinvent itself in a crowded and competitive market,” Saunders said.
He added that the reinvention consists of several strands that are now coming together convincingly. “Stronger marketing that has rebuilt cultural relevance, a cleaner and more purposeful assortment, and a willingness to show up with a point of view,” he noted.
How Are Retail Users Reacting To Gap?
Retail sentiment on Gap jumped to ‘extremely bullish’ from ‘bullish’ a day ago, with message volumes at ‘extremely high’ levels, according to data from Stocktwits.
“IMO they did a pretty good job here given the macro issues which are totally beyond the company’s control. They seem to have done a little sand bagging for the future as well. Green by end of day tomorrow (full disclosure, I am long),” a bullish user on Stocktwits said.
In the last 24 hours, the retail message volumes on the stock jumped 2,200% on Stocktwits and over the past year, the ticker witnessed a nearly 5% spike in followers on the platforms.
Shares of Gap have gained more than 41% in the last 12 months, outperforming the Consumer Discretionary Select Sector SPDR Fund, which has jumped 11% during the same period.
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