Gap’s fourth quarter performance did not satisfy the market, as shares declined following the results. Management attributed the quarter’s outcome to consistent growth at Old Navy, Gap, and Banana Republic, each showing positive comparable sales. CEO Richard Dickson emphasized that Gap’s namesake brand delivered its ninth consecutive quarter of positive comps, driven by strength in fleece, denim, and sleepwear, while Old Navy continued to gain share in activewear and denim. Tariff pressures continued to affect margins, but disciplined execution and category leadership in key segments supported stable operating performance.
Is now the time to buy GAP? Find out in our full research report (it’s free for active Edge members).
Gap (GAP) Q4 CY2025 Highlights:
- Revenue: $4.24 billion vs analyst estimates of $4.24 billion (2.1% year-on-year growth, in line)
- Adjusted EPS: $0.45 vs analyst estimates of $0.46 (in line)
- Adjusted EBITDA: $357 million vs analyst estimates of $336.2 million (8.4% margin, 6.2% beat)
- Revenue Guidance for Q1 CY2026 is $3.51 billion at the midpoint, below analyst estimates of $3.53 billion
- Adjusted EPS guidance for the upcoming financial year 2026 is $2.28 at the midpoint, missing analyst estimates by 2.5%
- Operating Margin: 5.4%, in line with the same quarter last year
- Locations: 3,474 at quarter end, down from 3,569 in the same quarter last year
- Same-Store Sales rose 3% year on year, in line with the same quarter last year
- Market Capitalization: $8.76 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Gap’s Q4 Earnings Call
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Mark Altschwager (Baird): Asked how Gap balances investments in growth accelerators like beauty and accessories with maintaining momentum in core apparel. CEO Richard Dickson explained that most investment is still directed toward core business, with new categories expected to scale in future years.
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Matthew Boss (JPMorgan): Inquired about underlying growth at the Gap brand and what’s driving the acceleration. Dickson emphasized market share gains through compelling assortments, marketing, and reduced discounting, especially in denim and fleece.
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Simeon Siegel (Guggenheim): Questioned the potential for new campaigns and beauty initiatives to drive store traffic. Dickson highlighted that Fashiontainment campaigns and beauty pilots are designed to increase omnichannel engagement and in-store visits.
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Brooke Roach (Goldman Sachs): Sought clarity on pricing and unit trends at Old Navy and the role of category initiatives in future growth. CFO Katrina O’Connell said AUR growth continues, supported by lower discounting, while Dickson pointed to denim and activewear leadership as ongoing priorities.
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Dana Telsey (Telsey Group): Asked about store closures, capital allocation, and the role of technology. Dickson and O’Connell detailed ongoing store optimization and increased investment in experiential formats and technology upgrades, including AI and RFID.
Catalysts in Upcoming Quarters
In upcoming quarters, our analysts will be watching (1) progress on the expansion of beauty and accessories as new revenue streams, (2) continued momentum in positive comps at Old Navy, Gap, and Banana Republic, and (3) the pace and returns of new store format rollouts and technology investments. Execution on cost optimization and effective tariff mitigation will also be key indicators of performance.
Gap currently trades at $23.29, down from $27.20 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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