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Gap Inc. NYSE: GAP delivered a mixed first-quarter report Thursday after the bell, slightly missing Wall Street's earnings and revenue expectations for the second consecutive quarter while lowering its full-year sales outlook due to weaker-than-expected performance at its Old Navy brand.
GAP Q1 FY26 EPS and sales miss as tariffs and growth spending hit margins, despite 2% comps for a ninth straight quarter.
The gap between the performance of The Gap and the clothing retailer's other brands is weighing on its stock.
Gap Inc (NYSE:GPS) shares fell more than 16% on Thursday after the apparel retailer issued a weaker-than-expected second-quarter sales outlook and trimmed its full-year revenue forecast, despite a broadly solid first-quarter performance and continued strength in its flagship Gap brand. The company reported first-quarter revenue of $3.5 billion, up 1% year over year but slightly below analyst estimates of $3.53 billion.
The Gap remains a 'hold' as shares trade near fair value of $22.50-$23.50, reflecting cyclical consumer headwinds and mixed brand performance. Old Navy's sluggish growth and exposure to lower-income consumers present ongoing risks, while the revitalized Gap brand shows encouraging momentum. Gross margins are stabilizing, supported by inventory discipline and easing tariff pressures; buybacks and a secure 3% dividend enhance per-share metrics.
Shares of apparel makers Gap and American Eagle Outfitters dropped 15% and 10%, respectively, in premarket trade on Friday after weak annual forecasts, as consumers curb discretionary spending amid a tough macroeconomic climate.
For two retailers that both saw their stock slide by a double-digit percentage after earnings, what may be most surprising is that executives at both Gap and American Eagle Outfitters say nothing is wrong with the economy.
The Gap, Inc. (GAP) Q1 2026 Earnings Call Transcript
The headline numbers for Gap (GAP) give insight into how the company performed in the quarter ended April 2026, but it may be worthwhile to compare some of its key metrics to Wall Street estimates and the year-ago actuals.
Gap (GAP) came out with quarterly earnings of $0.38 per share, missing the Zacks Consensus Estimate of $0.39 per share. This compares to earnings of $0.51 per share a year ago.
The apparel retailer now expects revenue to increase 1% to 2% this year, down from its prior outlook for 2% to 3% growth.