SAN FRANCISCO, August 28, 2026, 06:35 (EDT)
- Shares of Gap climbed 13.8% to $23.66 in premarket trade on Friday.
- Adjusted EPS was $0.52, surpassing the analyst forecast of $0.48.
- Comparable sales for the Gap brand increased by 10%, while Old Navy recorded a 4% decline and Athleta dropped 12%.
Gap Inc. (NYSE: GAP) rose 13.8% to $23.66 ahead of Friday’s session. The increase boosted implied equity value by roughly $1.03 billion compared to Thursday’s close.
The share rally anticipates a stronger rebound for the Gap brand itself, which reported $844 million in sales for the quarter, up 9%. Old Navy, meanwhile, posted $2.1 billion in sales, a decrease of 4%.
Total revenue fell by 2% to $3.65 billion. Adjusted earnings came in at $0.52 per share, topping the consensus estimate of $0.48. Adjusted operating margin stood at 7.1%.
Profitability was supported by pricing, offsetting soft overall sales. Each brand saw an increase in average unit retail. Excluding tariff recoveries, adjusted merchandise margin improved by 80 basis points.
Chief Executive Richard Dickson said the company is “particularly proud of the momentum at the Gap brand.” Dickson also noted that Old Navy continues to need improvement. Gap earnings release
| Brand | Q2 sales | Sales change | Comparable-sales change |
|---|---|---|---|
| Old Navy | $2.1 billion | down 4% | down 4% |
| Gap | $844 million | up 9% | up 10% |
| Banana Republic | $478 million | up 1% | up 3% |
| Athleta | $264 million | down 12% | down 12% |
Old Navy continues to serve as the primary valuation measure. Its quarterly sales are about two-and-a-half times higher than the Gap brand. The drop was caused by softer women’s seasonal merchandise and reduced foot traffic.
Gap named Michael Francis as president and CEO of Old Navy, with the appointment effective November 2. Francis became part of the company in March, following advisory work for Walmart and executive positions at Target.
Management increased its adjusted full-year EPS outlook to a range of $2.35–$2.45, up from the prior guidance of $2.30–$2.40. The company also raised its expected adjusted operating margin to between 7.4% and 7.6%.
Gap has tightened its sales forecast. The company anticipates fiscal-year revenue will grow by 1%–1.5%, compared to its earlier estimate of 1%–2%. Third-quarter sales are forecast to increase by 1.5%–2.5%.
The reported results factored in a $417 million benefit from tariff recovery. Adjusted numbers exclude this gain. According to management, full-year gross profit is anticipated to include around $15 million in separate tariff relief.
Gap’s cash and short-term investments totaled $2.5 billion at the end of the quarter. The company has returned $726 million to shareholders since the start of the year and retains $399 million available under its repurchase authorization.
Opinions remain mixed on Wall Street. The consensus among 20 analysts is a Buy rating, and their average target price stands at $25.97. Twelve analysts assign a Hold rating, while eight recommend Buy or Strong Buy.
Risks: Old Navy and Athleta are still shrinking. Fluctuations in consumer spending, higher energy prices, and changes in tariff policy may further impact traffic or profit margins. Premarket advances have limited the margin for potential execution missteps.
Investors are monitoring if fall merchandise helps steady Old Navy. Even a slight rebound at Old Navy would have a bigger impact on earnings than a further robust quarter from the smaller Gap brand.
