Gap Q2 Revenue Misses Estimates Amid Athleta Weakness, Tariff Impact

Gap reported Q2 revenue of $3.725B, missing analysts' forecasts. Athleta brand saw a 9% decline in comparable sales, while Old Navy, Gap, and Banana Republic reported positive comps. The company attributed the miss to weakness in Athleta and the impact of US tariffs. For Q3, Gap forecast net sales growth of 1.5%-2.5%, including tariff impact, and for FY25, the company expects net sales growth of 1%-2%.

Gap Inc. (NYSE:GAP) reported its second-quarter (Q2) financial results on Thursday, revealing a revenue figure that fell short of analysts' expectations. The company's shares declined more than 1% in after-hours trading following the announcement. Gap reported earnings per share (EPS) of $0.57 on revenue of $3.725 billion, which was slightly below the $3.73 billion and $0.55 EPS forecasted by analysts polled by Investing.com [1].

The company's Athleta brand, which specializes in athletic wear, saw a significant 9% decline in comparable sales. In contrast, Gap's Old Navy and Banana Republic brands reported positive comparable sales growth for the quarter. The company attributed the revenue miss to weakness in Athleta and the impact of U.S. tariffs on its imported products. For the third quarter (Q3), Gap forecast net sales growth of 1.5% to 2.5%, including the impact of tariffs. The company expects net sales growth of 1% to 2% for the full fiscal year 2025 [1].

Gap's Chief Executive Officer, Richard Dickson, has been working to revive the company's brands, but Athleta has been one of the most challenging to turn around. The company recently appointed Maggie Gauger, a former Nike executive, as CEO and president of Athleta. Dickson noted that the brand has been focusing on attracting new customers, which has come at the expense of creating compelling products for its existing customer base [2].

The retailer has been facing headwinds from tariffs, which have complicated its efforts to turn around its brands. Gap expects its operating margins to shrink to as low as 6.7% for the fiscal year, below last year's reported margins. The company estimates that tariffs could cause a net impact of up to $175 million, an increase from the $150 million estimated last quarter [2].

In comparison, other retailers such as Kohl's Corp., TJX Cos., and Abercrombie & Fitch Co. reported better-than-expected results this quarter, driven by strong back-to-school spending and consumer demand for discounts. These retailers have also boosted their outlooks despite concerns surrounding the economic outlook and inflation [2].

References:
[1] https://finance.yahoo.com/news/gap-q2-revenue-falls-short-212432093.html
[2] https://www.bloomberg.com/news/articles/2025-08-28/gap-margins-slashed-by-tariffs-sales-dragged-by-athleta