Gap Inc (NYSE:GAP) reported Thursday that second-quarter revenue slightly missed analysts’ expectations, as weaker-than-expected performance in its Athleta brand weighed on results. The apparel retailer also highlighted the effect of higher U.S. tariffs.
Shares of Gap declined more than 2% in premarket trading Friday.
The company posted earnings per share of $0.57 on revenue of $3.725 billion, compared with analysts’ projections of $0.55 per share on $3.73 billion in revenue, according to Investing.com.
Gap’s athleisure line Athleta saw comparable-store sales drop 9% during the quarter, while Old Navy, Gap, and Banana Republic reported positive comparable sales. The company noted it had started to experience “some impact from higher tariffs imposed on product imported into the United States.”
Gross margins fell to 41.2% from a year earlier, down 130 basis points, below the 41.9% consensus.
“FQ2 sales/EPS were ~in-line with consensus despite a gross margin shortfall but, as anticipated, higher S.E. Asia tariff rates are adding further pressure to the outlook,” said Baird analyst Mark R. Altschwager in a post-earnings note. He added that the stock’s risk-reward profile is now “looking more favorable in the low $20s, given early progress on tariff mitigation and a more de-risked earnings outlook.”
Jefferies analysts shared a similar view, stating they see “a more balanced risk/reward near term.”
For the third quarter, Gap expects net sales growth in a range of 1.5% to 2.5%, factoring in tariff effects. For fiscal 2025, the company continues to forecast net sales growth of 1% to 2%.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.