Gap Q3 2025 earnings

Apparel retailer Gap said Thursday its comparable sales rose 5% during the fiscal third quarter, driven by strong revenue at its namesake brand after its viral “Better in Denim” campaign with girl group Katseye. 

Putting aside pandemic-related spikes, the rise in comparable sales is the strongest growth for Gap since its fiscal 2017 holiday quarter and is well ahead of Wall Street expectations of 3.1%, according to StreetAccount. 

In an interview with CNBC, CEO Richard Dickson said the company hasn’t needed to discount as often to sell products, it’s winning customers from all income cohorts and it’s seeing a “great start” to the holiday shopping season. 

“While external data points to macro pressure, particularly on the low-income consumer, our customers are finding our price value, [and] our styles are breaking through the competitive landscape,” said Dickson. “Our product is resonating. So we’re very confident as we head into the holiday season.” 

Shares of Gap rose 5% in extended trading Thursday.

Here’s how the largest specialty apparel company in the U.S. performed during the quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 62 cents vs. 59 cents expected
• Revenue: $3.94 billion vs. $3.91 billion expected

The company’s net income during the three months ended Nov. 1 declined nearly 14% to $236 million, or 62 cents per share, compared with $274 million, or 72 cents per share, a year earlier. 

Sales rose to $3.94 billion, up 3% from $3.83 billion a year earlier. 

For Gap’s fiscal year, which is slated to end around early February, the company is now guiding to the high end of its previously released sales forecast, expecting sales to rise between 1.7% and 2%, in line with analyst expectations. It previously expected sales to rise between 1% and 2%.

The company is now expecting its full-year operating margin to be around 7.2%, compared to its previous range of between 6.7% and 7%. The forecast includes the impact of tariffs, estimated to be between 1 and 1.1 percentage points. 

Comparable sales across Gap, which owns its namesake banner, Old Navy, Athleta and Banana Republic, have been positive now for seven straight quarters. Under Dickson, the company has been as focused on boosting profitability and fixing operations as it has been on reigniting cultural relevance, which has led to sustained sales growth across the portfolio. 

Gap’s profitability had been growing, too, as a result, but now that it’s facing tariffs, the retailer’s gross margin and net income are both taking a hit. During the quarter, Gap’s gross margin fell 0.3 percentage points to 42.4% but still came in higher than expectations of 41.2%, according to StreetAccount. 

The 14% decline in Gap’s net income was primarily related to tariffs, finance chief Katrina O’Connell said in an interview. 

Gap’s better-than-expected results come as apparel sales remain generally soft across the industry and consumers pull back on nice-to-have items like new clothes in favor of necessities.

Aside from clear value players like Walmart and TJX Companies, earnings so far this season have been muted, with some companies blaming macroeconomic conditions and expressing caution about the holiday season. 

Dickson said Gap’s varied portfolio gives it a hedge in uncertain economic times because it can capture shoppers in a variety of different places. 

“Our portfolio appeals to a wide range of consumers, which is giving us great flexibility in today’s environment,” said Dickson. 

Here’s a closer look at how each of the company’s brands performed:

Gap’s namesake brand has been the focus of Dickson’s turnaround strategy since he took the helm as CEO just over two years ago.

During the quarter, comparable sales rose a staggering 7% – more than double the 3.2% gain analysts had expected, according to StreetAccount. Revenue rose 6% to $951 million.

During the quarter, Gap released its viral “Milkshake” campaign, featuring the early-aughts Kelis song and members of the Katseye pop group. The campaign helped sales, but Dickson said Gap brand’s growth is “a story about consistency” and a mix of better product, marketing and partnerships. 

Sales at Old Navy, Gap’s largest brand by revenue, rose 5% to $2.3 billion with comparable sales up 6%, far better than the 3.8% that analysts surveyed by StreetAccount expected. The company said it saw growth in key categories like denim, activewear, kids and baby. 

The elevated, work-friendly brand is still in turnaround mode but saw sales grow 1% to $464 million during the quarter with comparable sales up 4%, better than the 3.2% gain analysts had expected, according to StreetAccount.

This was the second quarter in a row Banana reported positive comparable sales, which the company attributed to better marketing and product. 

Both revenue and comparable sales at Athleta were down a whopping 11% to $257 million, an eyesore on Gap’s otherwise better-than-expected results.

Dickson has repeatedly said Athleta is in a reset year, but how long that reset will take remains unclear.

“We have been disappointed in the trend. We understand there’s a lot of work to do, but I really do believe in the brand,” said Dickson. “I believe in the leadership and we will continue to build this brand for the long term. It does deserve it.”