Gap Falls Short of Comparable Sales Estimates in Q2 Earnings Report

Gap traded lower in postmarket trading after missing comparable sales estimates with its Q2 earnings report. Comparable sales rose 1% YoY, short of the consensus estimate of 1.7%. Store sales were down 2% YoY, while e-commerce sales increased 9% YoY. The retailer cited a weakness in its Athleta brand as a contributing factor to the miss.

Gap Inc. (NYSE: GAP) reported its second-quarter fiscal 2025 results, with net sales remaining flat year-over-year at $3.7 billion. Comparable sales rose 1% year-over-year, falling short of the consensus estimate of 1.7% [1]. Store sales decreased 1% compared to last year, while online sales increased 3%, representing 34% of total net sales. The company attributed the miss in comparable sales to a weakness in its Athleta brand, which saw a 11% decline in net sales and a 9% drop in comparable sales [1].

Despite the miss in comparable sales, the company reported a 6% increase in diluted earnings per share to $0.57. Gross margin decreased to 41.2%, down 140 basis points from last year, primarily due to lapping the benefit of incremental sales in the second quarter of fiscal 2024 [1]. Operating income was $292 million, with an operating margin of 7.8%. The effective tax rate was 27.0%, and net income was $216 million.

Cash, cash equivalents, and short-term investments increased to $2.4 billion, up 13% from last year. Net cash from operating activities was $308 million, and free cash flow was $127 million. The company ended the second quarter with 371 million shares outstanding, after returning $144 million to shareholders through dividends and share repurchases [1].

The company's outlook for fiscal 2025 remains positive, with expectations for net sales growth. The board of directors approved a third-quarter fiscal 2025 dividend of $0.165 per share [1].

References:
[1] Gap Inc. (2025). Gap Inc. Reports Second Quarter Fiscal 2025 Results. Retrieved from https://www.gapinc.com/en-us/articles/2025/08/gap-inc-reports-second-quarter-fiscal-2025-results