Gap raised its annual profit forecast thanks to the strength of its namesake brand, and appointed a new chief of staff at Old Navy.
On Thursday, clothing retailer Gap raised its annual profit forecast, betting on sustainable growth for its namesake brand even as pressure persists at some of its other brands.
Shares of the company, which also named insider Michael Francis as Old Navy’s new CEO as part of a turnaround effort, rose about 11% in after-hours trading.
The company, after three years under the leadership of CEO Richard Dickson, has managed to revive demand after a long period of unstable sales. Merchandise focused on current trends and expanded marketing campaigns have helped increase the relevance of brands, even as consumers cut back on discretionary spending.
Gap’s namesake brand recorded 10% comparable sales growth in the second quarter, marking its tenth consecutive quarter of growth. According to data compiled by LSEG, analysts on average expected an increase of 8.8%.
Old Navy’s comparable sales fell 4% this quarter, compared with a 2% increase a year ago, while Athleta’s comparable sales fell 12% after falling 9% last year. “We have more work to do at Old Navy, but we understand the factors that impact performance and are taking specific actions that are already driving better results.” Dickson said.
Gap raised its annual adjusted profit per share forecast by 5 cents on both ends, to a range of $2.35 to $2.45. This outlook excludes a $95 million tariff rebate and related interest income of $5 million in the reported quarter, nor any potential benefit therefrom in the current quarter.
The company has revised its fiscal 2026 revenue growth forecast to a range of 1% to 1.5%, compared to a range of 1% to 2% previously forecast. Analysts estimate growth at 1.1%.
Gap said the forecast considers consumer trends and the broader economic and geopolitical environment, while acknowledging risks related to U.S. energy prices and tariffs.
Revenue for the quarter ended Aug. 1 fell 2% to $3.65 billion, slightly below analysts’ estimates of about $3.69 billion, while adjusted profit came in at 52 cents per share, beating expectations by 48 cents.
Lesson: Navigator Media
