Shoppers walk past the GAP fashion retailer on Oxford Street in London, England, on October 30, 2025.
John Keeble | Getty Images News | Getty Images
apparel retail store gap announced Thursday that comparable sales rose 5% in its fiscal third quarter, driven by strong earnings for its eponymous brand after its viral “Better in Denim” campaign with girl group Katseye.
Excluding the pandemic-related spike, the comparable sales increase was Gap’s strongest since the holiday quarter of fiscal 2017, according to Street accounts, and was well ahead of Wall Street expectations of 3.1%.
CEO Richard Dixon said in an interview with CNBC that the company is off to a “great start” to the holiday season, no longer having to offer frequent discounts to sell its products and reaching customers from all income levels.
“While external data shows macro pressures, particularly on lower income groups, our customers are seeing value in our price, (and) our style is breaking through the competitive landscape,” Dixon said. “Our products are resonating, so we’re very confident going into the holiday season.”
Gap stock rose 5% in extended trading Thursday.
Here’s how America’s largest specialty apparel company’s quarterly performance compared to Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: 62 cents vs. 59 cents expected Earnings: $3.94 billion vs. $3.91 billion expected
The company’s net income for the three months ended Nov. 1 fell nearly 14% to $236 million, or 62 cents a share, compared with $274 million, or 72 cents a share, in the year-ago period.
Revenue was $3.94 billion, an increase of 3% from $3.83 billion in the same period last year.
Gap’s fiscal year is scheduled to end around early February, and the company now expects sales to increase 1.7% to 2%, in line with analyst expectations, at the high end of its previously announced sales forecast. The company had previously expected sales to rise 1% to 2%.
The company now expects full-year operating margin to be approximately 7.2%, compared to the previous range of 6.7% to 7%. This forecast includes the impact of tariffs, which is estimated to be between 1 and 1.1 percentage points.
Comparable sales across Gap, Old Navy, Athleta and Banana Republic, which own the company’s namesake banner, have now had seven straight quarters of positive sales. Under Dickson, the company is as focused on increasing profitability and operational improvements as it is on rekindling cultural relevance, which has led to sustained sales growth across its portfolio.
As a result, Gap’s profitability had also improved, but now it faces tariffs that have hurt both the retailer’s gross and net profits. Gap’s gross margin fell 0.3 points to 42.4% during the quarter, according to StreetAccount, but still beat expectations of 41.2%.
The 14% decline in Gap’s net income was primarily related to tariffs, Finance Director Katrina O’Connell said in an interview.
Gap’s better-than-expected results come as apparel sales remain generally weak across the industry, with consumers cutting back on nice-to-have items like new clothing in favor of essentials.
Apart from the clear values that players prefer, walmart and TJX companiessome companies have blamed the macroeconomic situation and expressed caution over the holiday season, resulting in weak profits so far this season.
Dixon said Gap’s diversified portfolio is a hedge in uncertain economic times because it can reach shoppers in a variety of locations.
“Our portfolio appeals to a wide range of consumers, which gives us great flexibility in today’s environment,” Dixon said.
Let’s take a closer look at the performance of each of the company’s brands.
gap
Gap’s namesake brand has been the focus of Mr. Dixon’s turnaround strategy since he took over as CEO nearly two years ago.
According to StreetAccount, comparable sales rose a whopping 7% in the quarter, more than double the 3.2% increase that analysts had expected. Sales increased 6% to $951 million.
During the quarter, Gap released a viral “Milkshake” campaign featuring an early ’80s song by Kelis and members of the pop group Katzeai. While the campaign helped boost sales, Dixon said the Gap brand’s growth has been “a story about consistency” and a combination of better products, marketing and partnerships.
old navy
Sales at Old Navy, Gap’s largest brand by sales, rose 5% to $2.3 billion, while like-for-like sales rose 6%, well above the 3.8% expected by analysts surveyed by StreetAccount. The company said it is seeing growth in key categories such as denim, activewear, kids and babies.
banana republic
The upscale, work-friendly brand remains in rebuilding mode, but revenue for the quarter rose 1% to $464 million, with comparable sales up 4% and beating analysts’ expectations for a 3.2% increase, according to Street Accounts.
This is the second consecutive quarter that Banana Co. has reported positive comparable sales, which the company attributes to marketing and product improvements.
Athleta
Athleta’s sales and comparable sales both fell 11% to $257 million, a sore point for Gap’s better-than-expected results.
Dixon has said repeatedly that Athleta is in a reset year, but it remains unclear how long the reset will take.
“We are disappointed with this trend. We understand there is a lot of work to be done, but I truly believe in this brand,” Dixon said. “I believe in leadership and will continue to build this brand for the long term, which makes sense.”
