Shares of Gap Inc. surged by almost 7% on Thursday after UBS elevated its rating from Neutral to Buy and raised its 12-month price target to $41 from $26. The Swiss bank cited tangible progress under CEO Richard Dickson’s turnaround plan, pointing to stabilized same-store sales, inventory reductions of 15% year-over-year in Q4, and improving full-price sell-through rates at core banners. UBS analysts now forecast a return to mid-single-digit revenue growth in fiscal 2026 and a 100-basis-point expansion in gross margin as the company leverages a more disciplined supply-chain strategy and timely promotional cadence.

Gap’s broader strategic initiatives are gaining traction, particularly Old Navy’s push into beauty and personal care, expected to add 2 to 3 percentage points to total revenue growth by 2027. Management highlighted that beauty categories have delivered basket-size increases of more than 20% on pilot shelves, while the Athleta brand continues to expand its retail footprint by 25 new North American locations this year. On margins, underlying gross profit improved by 120 basis points sequentially in Q4, despite a one-time $35 million tariff headwind. Executives reiterated their commitment to disciplined pricing and favorable product-mix shifts, targeting a full-year operating margin north of 8%.