Gap, owner of the Old Navy, Gap, Banana Republic and Athleta brands, has recorded net sales increase of 2% in the first quarter (Q1) of fiscal 2025, reaching $3.46bn.
This rise was attributed to the performance of Gap and Old Navy, which enjoyed 5% and 3% sales growth respectively during the period.
The company's comparable sales also rose 2% compared to the previous year, with Old Navy achieving its ninth and Gap its eighth consecutive quarter of market share growth.
Net sales of Banana Republic fell 3% to $428m, and Athleta also saw a decrease of 6% in net sales, amounting to $308m.
Gap’s e-commerce continued to be a strong segment, with online sales climbing by 6%, now representing 39% of the total net sales.
For the quarter ending 3 May 2025, the company reported a net income increase to $193m and diluted earnings per share rose to $0.51.
Gross margin expanded by 60 basis points to reach 41.8%, while merchandise margin remained stable year-on-year.
Operating expenses saw a marginal reduction to $1.18bn from $1.19bn, and operating income increased to $260m, resulting in an operating margin of 7.5%.
Looking ahead to the fiscal year 2025, Gap anticipates a net sales growth between 1% and 2%, with an expected operating income rise between 8% and 10%.
The company has set aside $600m for capital expenditures during this period.
Gap president and chief executive officer Richard Dickson stated: “Gap Inc delivered strong first quarter results, exceeding financial expectations and gaining market share for the ninth consecutive quarter.
“We had positive comp sales for the fifth consecutive quarter, with our two largest brands, Gap and Old Navy, winning in the marketplace, demonstrating the power of our brand re-invigoration playbook. The rigour we’ve embedded across the organisation continued to serve us well, driving gross margin and operating margin expansion in the quarter. These results are yet another proof point that our strategy is working. In this highly dynamic environment, we are optimistic yet realistic and remain focused on controlling the controllables as we build our company for long term growth.”
Gap's current fiscal projections have not taken into account current trade tariffs which include a 30% rate on most imports from China and a 10% rate on imports from other countries.
These tariffs are projected to add an estimated incremental cost between $250m and $300m. Gap is developing strategies to mitigate more than half this potential cost.
The company anticipates the impact on operating income for the fiscal year 2025 to be between $100m and $150, after implementing these strategies, and minimal impact on Q2 gross margin.
