Gap (GAP) Q2 2025 earnings

Gap’s fiscal second-quarter revenue came in lighter than expected on Thursday but sales at Banana Republic far exceeded expectations as the brand’s turnaround begins to show results. 

The specialty apparel company behind Old Navy, Athleta, Banana Republic and its namesake banner saw comparable sales rise 1% during the quarter, weaker than the 1.9% rise that analysts had expected, according to StreetAccount. Overall revenue also missed expectations, while earnings per share came in better than estimates. 

Shares of Gap fell roughly 7% in after-hours trading.

While Gap, Banana Republic and Old Navy all saw comparable sales rise during the quarter, Athleta dragged down the company’s overall performance with comps down 9%. 

“Clearly, Athleta is a powerful brand in the active space, being the number five brand in the space, but we’re disappointed in the quarter. We have moved away, if you will, from really distinctive performance roots,” CEO Richard Dickson told CNBC in an interview. “We’ve paid a lot of attention, trying to court a new customer, and ultimately didn’t have enough offerings for our core customer. As we balance that out, we’ve been very transparent to say it’s a year of reset for us.” 

Last month, Gap announced that Maggie Gauger, a longtime veteran of Nike, had been tapped as Athleta’s next CEO — the third top executive hired to helm the brand in the last two years. 

Here’s how Gap performed in the quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 57 cents vs. 55 cents expected
• Revenue: $3.73 billion vs. $3.74 billion expected

The company’s reported net income for the three-month period that ended Aug. 2 was $216 million, or 57 cents per share, compared with $206 million, or 54 cents per share, a year earlier. 

Sales rose to $3.73 billion, up slightly from $3.72 billion a year earlier.

The company reaffirmed its fiscal 2025 net sales growth outlook and is continuing to expect revenue to grow between 1% and 2%, in line with estimates of 1.6%, according to LSEG. For the current quarter, Gap is expecting sales to grow between 1.5% and 2.5%, better than the 2% that analysts had estimated, according to LSEG.

When Gap last reported results in May, the tariff situation across Asia, where the company manufactures some of its products, was still shaping up but now, the picture is clearer. It previously said it expected tariffs to cost between $100 million and $150 million on a net basis and on Thursday, said those costs are now going to be between $150 million and $175 million. 

To offset the impact, Gap is doing what other companies are doing: working with its suppliers, adjusting its sourcing, diversifying its supply chain and taking targeted price increases where appropriate. 

Notably, the company said it doesn’t expect the annualization of tariffs to cause any further declines in operating income in 2026. 

“As it relates to pricing, we’re making targeted adjustments with pricing, as we always do. There isn’t anything that we’ve done that is substantially different,” Dickson said. “We focus on making sure that we’re presenting to our consumer the right value proposition, and ultimately want to make even more sure that we’re sustaining the momentum and market share gains that our playbook has been performing.” 

Just over two years into Dickson’s tenure as Gap’s CEO, the company is in a far different position. It’s seen six straight quarters of comparable sales growth, it’s sitting on a $2.2 billion cash pile and its brands are back at the center of culture and conversation. 

Recently, Gap launched its Better in Denim campaign featuring Katseye and Kelis’s 2003 hit “Milkshake.” Dickson said the campaign has been a standout success, delivering 20 million views in the first three days, 400 million total views and 8 billion impressions. It’s also the No. 1 search on TikTok, Dickson said. 

“We could all acknowledge that Gap moved from what was a clothing retailer just a couple years ago, that was overly promotional and didn’t have necessarily a strong voice from a merchandising perspective to consumers, and now today, it is a pop culture brand that’s telling great stories, driving great merchandising initiatives and arguably shaping culture with some of the programs and products and marketing campaigns,” Dickson said. “This is proving that Gap is a powerful pop culture brand, and this is also what our playbook looks like when you get it right.” 

The campaign highlights the efforts Gap is taking to stay competitive in the crucial denim category, especially with Levi’s recent partnership with Beyoncé and American Eagle‘s campaign with Sydney Sweeney. At a time when consumers are pulling back on nice-to-have products like new clothes and accessories, retailers have had to do more to cut through the noise and ensure they’re resonating with consumers. 

Still, as the company continues to make strides in its turnaround plan, Wall Street has come to expect a lot, and Gap has had to work harder to beat expectations. 

During the quarter, its gross margin came in at 41.2%, behind expectations of 41.9%, according to StreetAccount. 

Here’s a closer look at how each brand performed: 

Old Navy: Gap’s largest and most important brand saw sales of of $2.2 billion, up 1% compared with last year. Comparable sales were up 2%, compared with expectations of up 2.2%, according to StreetAccount.

Gap: The namesake banner saw net sales of $772 million, up 1% compared with last year. Comparable sales were up 4%, compared with expectations of 4.1%, according to StreetAccount. Its the seventh consecutive quarter of comparable sales growth.  

Banana Republic: The safari-chic, business essentials brand saw net sales of $475 million, down 1% compared with last year. Comparable sales were up 4%, far ahead of expectations of 0.2%, according to StreetAccount.  

Athleta: The athleisure brand saw sales of $300 million, down 11% compared to last year. Comparable sales were down 9%. The brand’s new CEO is looking to reverse that slump and reconnect with Athleta’s core consumer.