Gap stock sinks after-hours as weak outlook overshadows strong Q1
Published: 16:35 29 May 2025 EDT
Gap Inc (NYSE:GPS) fell more than 15% in after-hours trading on Thursday as a flat revenue forecast for the second quarter and ongoing tariff concerns overshadowed better-than-expected first-quarter results.
The apparel retailer reported Q1 revenue of $3.5 billion, above estimates of $3.42 billion and up 2% year-over-year.
Earnings per share came in at $0.51, beating expectations of $0.45. Comparable sales rose 2%, ahead of the projected 1.6% increase.
Gap said second-quarter revenue would be flat year-over-year and maintained its full-year revenue growth forecast of 1% to 2%. The company expects a full-year operating income increase of 8% to 10%.
Tariffs are expected to have minimal impact in Q2 but could cost $250 million to $300 million on a gross basis for the full year if they remain in place. After mitigation, the net impact is estimated at $100 million to $150 million, largely in the second half.
Old Navy posted a 3% rise in comparable sales—its ninth consecutive quarter of market share gains. The Gap brand rose 5%, Banana Republic was flat, and Athleta declined 8%.
Gross margin improved 60 basis points to 41.8%, with online sales rising 6% to account for 39% of total revenue. Inventory increased 7% to $2.1 billion, while free cash flow was negative $223 million.
CEO Richard Dickson said the company “exceeded expectations” and pointed to five straight quarters of positive comparable sales as evidence that brand reinvigoration efforts are gaining traction.
Gap returned $131 million to shareholders through dividends and buybacks and approved a second-quarter dividend of around $0.16 per share. It plans net closures of 35 stores and capital expenditures of around $600 million this year.
