Gap Inc. Shares Slide 2.78% on Earnings Report as Trading Volume Surges 80.69% to 480 Million

On August 28, 2025, The (GAP) fell 2.78% with a trading volume of $0.48 billion, a 80.69% increase from the prior day. The decline followed Gap Inc.’s Q2 2025 earnings report, which highlighted flat net sales of $3.7 billion year-over-year but a 6% rise in diluted earnings per share to $0.57. The company reaffirmed its fiscal 2025 net sales growth outlook despite increased tariff-related costs, which are now projected to impact annual profits by $150–175 million, up from prior estimates.

Gap Inc. reported positive comparable sales for the sixth consecutive quarter, driven by Old Navy, Gap, and Banana Republic. Old Navy’s sales rose 1% to $2.2 billion, while Gap’s sales grew 1% to $772 million, with both brands achieving strong comp growth. Banana Republic saw a 1% sales decline but a 4% comp increase. Athleta, however, lagged with a 11% sales drop and 9% comp decline, prompting leadership changes and a strategic reset. The company emphasized disciplined inventory management and cost-saving initiatives to offset inflation and tariff pressures.

Financially, Gap Inc. ended the quarter with $2.4 billion in cash and equivalents, a 13% year-over-year increase. Free cash flow stood at $127 million, though gross margin fell 140 basis points to 41.2% due to lapping revenue-sharing benefits from a prior credit card partnership. Operating income reached $292 million, with a 7.8% margin, while the company returned $144 million to shareholders via dividends and buybacks. Management expressed confidence in long-term value creation, citing brand revitalization efforts and cultural relevance campaigns like the "Better in Denim" initiative.

For fiscal 2025, Gap Inc. anticipates net sales growth of 1–2% and operating margins of 6.7–7.0%, reflecting an estimated 100–110 basis point impact from tariffs. The company plans to mitigate costs through supply chain diversification and targeted pricing adjustments. Despite near-term challenges, the board of directors reaffirmed its commitment to shareholder returns and strategic reinvestment in core operations and technology infrastructure.

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