Barclays believes Gap has what it needs to avoid potential future tariff pressures, making the outlook for Old Navy’s parent company more constructive. The bank upgraded the clothing retailer’s rating to overweight from equal. Analyst Adrian Yee also raised his price target to $30 per share from $19, which would represent a 24% increase from Friday’s closing price. Yee touted the disciplined leadership strategy under Gap CEO Richard Dixon and CFO Katrina O’Connell that helped elevate Gap’s brand and drive sustainable growth for the company. GAP YTD Mountain GPS YTD Chart “GAP’s strategy is focused on rebuilding long-term brand equity through product innovation, customer targeting, and high-revenue marketing,” she wrote. “Our investment thesis is based on 1) leadership and brand focus to drive market share growth, 2) operational discipline to expand margins, and 3) a flexible model to absorb tariff pressures,” Yee said, adding that Dixon has prioritized customer engagement, marketing, product innovation and quality since July 2023. These efforts have led to brand recovery and momentum across the Gap, Old Navy and Banana Republic brands, she said. The company also maintains strict cost and inventory controls. A combination of better products, targeted marketing and stronger brand resonance among consumers helped drive the company’s early fall season success, Yi said. These tailwinds could also provide the company with a powerful hedge against tariff pressure. “While tariff pressures may impact margins in the short term, GAP is successfully driving full price sales and fixed cost leverage to offset such pressures,” Yih wrote. “While risks regarding price elasticity and uncertain consumer demand remain, we believe strong brand resonance and the potential for consumer stimulation could help offset these pressures.” Gap stock is set to rise just over 2% in 2025.
