Gap Cuts Full-Year Sales Outlook to 1-2% While Q1 Income Jumps to $339M
GAP•Gap Inc. lowered its full-year sales outlook to 1-2% growth from 2-3%, attributing the revision to softness in Old Navy’s seasonal and dress categories. First-quarter net income rose to $339 million, comp sales climbed 2%, and gross margin reached 40.5%, while management lifted its 2026 EPS forecast to $2.30–$2.40.
1. First-Quarter Financial Performance
In Q1, Gap Inc. posted net income of $339 million, up from $193 million a year ago, driven by a 2% increase in comparable sales. Gross margin reached 40.5%, exceeding targets by 30 basis points, and operating income rose to $445 million from $260 million.
2. Revised Sales and Earnings Guidance
Management cut the full-year sales growth outlook to 1-2% from 2-3%, citing softness in certain Old Navy categories, while raising the 2026 EPS guidance to $2.30–$2.40 per share from $2.20–$2.35. The company also returned $450 million to shareholders through dividends and share repurchases.
3. Old Navy Category Dynamics
Old Navy’s seasonal product and dress segments underperformed expectations, though activewear, denim, and kids’ and baby categories showed strength. Plans include launching an Old Navy Sport format to capitalize on the fast-growing activewear market.
