Gap Inc. Reports Fourth Quarter and Fiscal 2025 Results; Provides Fiscal 2026 Outlook (Form 8-K)

Gap Inc. Reports Fourth Quarter and Fiscal 2025 Results; Provides Fiscal 2026 Outlook

2025 net sales grew 2% versus last year, at high end of outlook; comparable sales up 3%

8th consecutive quarter of positive comparable sales

Delivered full year operating income of $1.1 billion; operating margin of 7.3%, exceeded outlook

Generated $1.3 billion in operating cash flow for the year

Announces new $1 billion share repurchase authorization

SAN FRANCISCO - March 5, 2026 - Gap Inc. (NYSE: GAP), the largest specialty apparel company in the U.S. with a purpose-driven house of iconic brands including Old Navy, Gap, Banana Republic, and Athleta, today reported financial results for its fourth quarter and fiscal year ended January 31, 2026.

"I am pleased to report that Gap Inc. delivered a successful fourth quarter, marking another year of meaningful progress," said President and Chief Executive Officer, Richard Dickson. "The execution of our playbook is driving consistent results, as we achieved our second consecutive year of topline growth and eighth consecutive quarter of positive comparable sales. Financial and operational rigor combined with the strength of our platform drove one of our highest gross margins in the last 25 years and further strengthened our balance sheet."

Dickson continued, "As we move into the next phase of our transformation we remain focused on growing our core apparel business through continuous improvement while thoughtfully seeding growth accelerators that will scale over time. Our aspirations remain high and our teams are energized as we continue to drive toward becoming a high performing house of iconic American brands that delivers long-term value for our shareholders."

Fourth Quarter Fiscal 2025 - Financial Results

•Net sales of $4.2 billion were up 2% compared to last year.

◦Store sales were flat and online sales increased 5% compared to last year.

◦Online sales represented 42% of total net sales.

◦Comparable sales were up 3%.

•Gross margin of 38.1%, declined 80 basis points versus last year.

◦Merchandise margin declined 90 basis points versus last year primarily due to an estimated net tariff impact of approximately 200 basis points. Average unit retail grew as a result of lower discounting.

◦Rent, occupancy, and depreciation (ROD) as a percent of sales leveraged 10 basis points versus last year.

•Operating expense was $1.4 billion.

•Operating income was $229 million; operating margin of 5.4%.

•The effective tax rate was 27.5%.

•Net income of $171 million; diluted earnings per share of $0.45.

Full Year Fiscal 2025 - Financial Results

•Net sales of $15.4 billion were up 2% compared to last year.

◦Store sales were up 1% compared to last year. The company ended the year with nearly 3,500 store locations in about 35 countries, of which 2,474 were company operated.

◦Online sales increased 4% compared to last year and represented 39% of total net sales.

◦Comparable sales were up 3%.

•Gross margin of 40.8%, declined 50 basis points versus last year.

◦Merchandise margin declined 80 basis points versus last year primarily due to an estimated net tariff impact of approximately 120 basis points.

◦Rent, occupancy, and depreciation (ROD) as a percent of sales leveraged 30 basis points versus last year.

•Operating expense was $5.2 billion.

•Operating income was $1.1 billion; operating margin of 7.3%.

•The effective tax rate was 27.9%.

•Net income was $816 million; diluted earnings per share of $2.13.

Balance Sheet and Cash Flow Highlights

•Ended the year with cash, cash equivalents and short term investments of $3.0 billion, an increase of $414 million from the prior year.

•Fiscal 2025 net cash from operating activities was $1.3 billion. Free cash flow, defined as net cash from operating activities less purchases of property and equipment, was $823 million for the year.

•Ending inventory of $2.2 billion was up 7% compared to last year primarily as a result of higher cost due to tariffs.

•Fiscal year 2025 capital expenditures were $470 million.

•Paid a fourth quarter dividend of $0.165 per share totaling $62 million.

◦The Company's Board of Directors approved a first quarter fiscal year 2026 dividend of $0.175 per share, representing an approximate 6% increase compared to the fourth quarter fiscal year 2025 dividend per share.

•Repurchased 7 million shares for $155 million during fiscal year 2025, ending the year with 372 million shares outstanding.

◦Underscoring Gap Inc.'s continued commitment to returning cash to shareholders, today the company announced that its Board of Directors approved a new $1 billion share repurchase authorization for the company's common stock, superseding the company's existing authorization dated February 26, 2019.

•Returned $402 million of cash to shareholders in the form of dividends and share repurchases during fiscal year 2025.

Additional information regarding free cash flow, which is a non-GAAP financial measure, is provided at the end of this press release along with a reconciliation of this measure from the most directly comparable GAAP financial measure for the applicable period.

Fourth Quarter and Full Year Fiscal 2025 - Global Brand Results

Comparable Sales

			Fourth Quarter												Fiscal Year
			2025						2024						2025						2024
Old Navy			3		%				3		%				3		%				3		%
Gap			7		%				7		%				6		%				4		%
Banana Republic			4		%				4		%				3		%				1		%
Athleta			(10)		%				(2)		%				(9)		%				-		%
Gap Inc.			3		%				3		%				3		%				3		%

Old Navy:

•Fourth quarter net sales of $2.3 billion were up 3% compared to last year. Comparable sales were up 3%. The brand's price value equation is resonating with consumers as Old Navy continues to win with strategic categories and across a wide range of income levels.

•Full year net sales of $8.7 billion were up 3% versus last year. Comparable sales were up 3%.

Gap:

•Fourth quarter net sales of $1.1 billion were up 8% compared to last year. Comparable sales were up 7%. Gap is demonstrating the momentum it's gaining as it continues to expand its customer base across generations.

•Full year net sales of $3.5 billion were up 5% versus last year. Comparable sales were up 6%.

Banana Republic:

•Fourth quarter net sales of $549 million were up 1% compared to last year. Comparable sales were up 4%. The brand delivered its third consecutive quarter of comp growth, reflecting progress in product elevation and sharper marketing and merchandising.

•Full year net sales of $1.9 billion were down 1% versus last year. Comparable sales were up 3%.

Athleta:

•Fourth quarter net sales of $354 million were down 11% compared to last year. Comparable sales were down 10%. We remain focused on rebuilding the brand for the long term.

•Full year net sales of $1.2 billion were down 10% versus last year. Comparable sales were down 9%.

Fiscal 2026 Outlook

The fiscal 2026 full year and first quarter outlook provided below are based on tariff rates in effect prior to February 20, 2026. Separately, the company is expecting a net gain of $313 million in the first quarter of 2026 related to a legal settlement and is concurrently pledging to make a charitable donation of $50 million to a combination of the Gap Foundation and our donor advised fund.

Including the net benefit of both the gain and donation, the company expects full year reported diluted earnings per share to be approximately $2.71 to $2.86, reported operating expense leverage, and reported operating margin expansion. For the first quarter, the company expects reported operating expense leverage.

All fiscal 2026 outlook measures provided below exclude the impact of these items.

Full Year Fiscal 2026

			Full Year Fiscal 2026 Outlook						Full Year Fiscal 2025 Results1
Net sales			Up 2% to 3% year-over-year						$15.4 billion
Gross margin			Flat to up slightly year-over-year						40.8%
Adjusted operating expense (% of net sales)			About flat year-over-year						33.5%
Adjusted operating margin			About 7.3% to 7.5%						7.3%
Net interest income			Approximately $10 million to $15 million						$17 million
Effective tax rate			Approximately 27%						27.9%
Adjusted diluted earnings per share			Approximately $2.20 to $2.35						$2.13
Capital expenditures			Approximately $650 million						$470 million
Net store closures2			About flat						32

1 There were no adjusted metrics during fiscal 2025; therefore, reported amounts for operating expense as a percentage of net sales, operating margin, and diluted earnings per share are included for comparative purposes.

2 Refers to company-operated stores.

First Quarter Fiscal 2026

			First Quarter Fiscal 2026 Outlook						First Quarter Fiscal 2025 Results1
Net sales			Up 1% to 2% year-over-year						$3.5 billion
Gross margin			Down approximately 150bps to 200bps including an estimated 200 bps of net tariff impact						41.8%
Adjusted operating expense (% of net sales)			About 35%						34.3%

Webcast and Conference Call Information

Whitney Notaro, Head of Investor Relations at Gap Inc., will host a conference call to review the company's fourth quarter and fiscal year 2025 results beginning at approximately 2:00 p.m. Pacific Time today. Ms. Notaro will be joined by President and Chief Executive Officer, Richard Dickson and Chief Financial Officer, Katrina O'Connell.

A live webcast of the conference call and accompanying materials will be available online at investors.gapinc.com. A replay of the webcast will be available at the same location.

Market Share Information

References to market share in this press release and related conference call and accompanying materials are for the US market, according to Circana data for the 12 month period ending January 2026, unless stated otherwise. Market share data is subject to limitations on the availability of up-to-date information. In particular, market share data may not be available for all retail channels in a category. The company believes that the Circana data is reliable, but it has not verified the accuracy or completeness of the data or any assumptions underlying the data. In addition, market share information reported by the company may be different from market share information reported by other companies due to differences in category definitions, the use of data from different vendors, internal estimates and other factors.

Non-GAAP Disclosure