Gap (GAP) earnings Q1 2026
Sell by Openness‘s largest brand, Old Navy, fell short of expectations in the first quarter of its fiscal year, prompting the retailer to cut its sales forecast on Thursday.
During the quarter, Old Navy’s comparable sales rose 1%, while analysts expected sales to rise 3%, according to StreetAccount.
As a result, Gap lowered its sales forecast and expects companywide sales to increase between 1% and 2%, down from the previous range of 2% to 3%.
Gap’s shares fell more than 14% in extended trading following the results.
In an interview with CNBC, CEO Richard Dickson attributed the slowdown in sales to spring and summer products failing to attract shoppers’ attention, not a larger macroeconomic problem.
“This is not a consumer issue,” Dickson said. “We’re winning in the low, middle and high income brackets. When you have the right product at the right price-value equation, customers are there, and our seasonal categories are off to a weaker start.”
While Old Navy appeals to low- and middle-income consumers who feel economic shocks like rising gas prices more acutely than higher-income groups, these customers are still shopping — just in different categories.
Dickson said Old Navy’s dress and shorts sales were particularly weak, while its active, denim and children’s categories were strong. He said the brand is working to increase sales with better price points and marketing and is seeing trends starting to improve.
Still, Dickson said the company is taking a “moderate outlook” for the year as Old Navy’s slowdown continues this quarter. Given that the brand accounts for nearly 60% of Gap’s total revenue, any crackdown on Old Navy would impact the entire company.
While Gap lowered its sales outlook for this year, its profitability is another story. The company raised its forecast and now expects adjusted earnings per share to be between $2.30 and $2.40, up from $2.20 to $2.35 previously.
Here’s how the specialty clothing company performed in the fiscal first quarter, compared to Wall Street’s expectations, according to a survey of analysts by LSEG:
- Earnings per share: 38 cents adjusted, 37 cents expected
- Revenues: 3.50 billion dollars, while the expectation was 3.52 billion dollars
Sales rose slightly to $3.50 billion, up slightly from $3.46 billion the year before.
The company’s reported net income for the three months ending May 2 was $339 million, or 90 cents per share, compared to $193 million, or 51 cents per share, a year ago. Excluding one-time items related to a hefty legal settlement, Gap had earnings of 38 cents per share.
Chief Financial Officer Katrina O’Connell attributed the high earnings forecast to the availability of tax rates and interest income. The company expects an $80 million benefit from reduced tariff rates but said it did not include that in the guidance and instead reserved it. Half will be set aside due to high fuel prices, while the other half will be set aside in case the company needs to increase promotions to stimulate demand.
Let’s take a closer look at how each brand performs here.
Openness: Comparable sales at Gap’s eponymous banner, the centerpiece of its turnaround, rose 10% during the quarter, according to StreetAccount; This is much better than analysts’ expectations for growth of 5.5%. Sales increased 10% overall to $796 million. Proper marketing and a better presence in key categories such as denim, fleece and kids drove this quarter.
Banana Republic: Comparable sales at the workwear brand fell short, growing 2%, compared to analysts’ expectations of 4%, according to StreetAccount. Overall sales increased 1% to $431 million. This was the fourth consecutive quarter of positive comparable sales at Banana Republic. Earlier this month, Gap announced the appointment of Donald Kohler, former CEO of PVH Americas, as the brand’s next CEO. “We’re getting better in women’s, including pants and sweaters, which are performing particularly well,” Dickson said. “[Kohler] “He brings incredible, deep experience in luxury, premium and specialty retail, and we are truly excited to have him lead the brand’s next chapter.”
Athlete: Sales of Gap’s sportswear brand continued to decline. Comparable sales fell 11%, while overall sales fell 12%. New CEO Maggie Gauger, a Nike veteran, has worked to streamline the product mix, and Dickson expects some improvement in the back half of the year. “It’s up to the consumer,” he said. “We have to communicate this to them and then we’ll see how they react.”
Old Navy: Sales rose 1% to $2 billion, while comparable sales rose 1%, worse than expected.
