New York, May 29, 2026, 14:04 EDT
- Gap dropped 17.6% in afternoon trading. The retailer lowered its full-year sales forecast.
- Old Navy took its biggest hit from women’s seasonal apparel, with dresses leading declines.
- Gap lifted its adjusted earnings outlook, though investors zeroed in on the weaker sales growth.
Gap Inc. shares dropped 17.6% to $20.60 Friday afternoon. That puts the retailer on pace for its sharpest fall in roughly a year. Traders sold as weak demand at Old Navy offset the company’s raised profit outlook.
Gap’s stock slide is in focus as the retailer’s turnaround has relied on tighter inventory, stronger marketing, and more traffic at key brands. Even though Gap lifted its earnings guidance, cutting its sales forecast put a tougher question to investors—can the company keep growing while shoppers remain picky about buying apparel?
Gap late Thursday cut its fiscal 2026 net sales outlook and now sees growth of 1% to 2%, down from its earlier expectation of 2% to 3%. Gap boosted its adjusted diluted earnings-per-share target to a range of $2.30 to $2.40, up from $2.20 to $2.35, citing expected tariff relief.
Net sales for the first quarter were up 1% to $3.5 billion. Comparable sales, which track sales at stores and channels open at least a year, increased 2%. Gross margin dropped 130 basis points to 40.5%. A basis point equals one-hundredth of a percentage point.
Gap’s namesake brand same-store sales climbed 10%, but Old Navy, its biggest chain, saw comps up just 1%. Athleta stayed soft, off 11% on comparable sales, and Banana Republic gained 2%.
Gap CEO Richard Dickson said there was “continued progress” at the company and pointed to a double-digit comparable-sales gain for the Gap brand, calling it one of its best quarters in over twenty years. At the same time, he said results across the rest of the portfolio were “varied.” PR Newswire
Dickson said on the post-earnings call that Old Navy’s problems weren’t due to weak consumers. “We are not seeing this as a consumer issue,” he said. He pointed to dresses lacking the “right fashion and value equation.” Investing.com India
Analysts had a tough take. Dana Telsey at Telsey Advisory told Reuters Gap’s “moderated outlook is disappointing,” and BTIG called Old Navy the “key swing factor.” JPMorgan moved Gap down to neutral from overweight and dropped its price target to $27 from $35. Reuters Investing.com
Gap slid harder than the broader retail group again, with pressure across mall and apparel stocks. The SPDR S&P Retail ETF lost 1.8%. American Eagle Outfitters dropped 12.7% after warning about near-term margin pressure.
Gap is still seeing a profit cushion. The company said it’s expecting around $80 million of net tariff relief to help gross profit and operating income this year, some of which will go toward higher fuel costs and potential promotions. Adjusted earnings don’t include things like a $313 million legal-settlement gain and a $50 million charitable gift.
Old Navy’s turnaround could drag out if dresses, swimwear and other seasonal lines stay weak. Gap might have to run more markdowns, putting pressure on margins while management works to back growth spending and stick to its earnings goals for the year. For now, Wall Street is focusing on the sales cut as the main takeaway.
