Gap Inc (GAP) investor relations material

Executive summary

• Net sales for Q2 2026 declined 2% year-over-year to $3.7 billion, with comparable sales down 1%; Gap brand delivered 10% comp growth, Old Navy and Athleta saw declines, and Banana Republic posted 3% comp growth.

• Gross margin rose to 52.8% (reported) due to a $417 million IEEPA tariff recovery; adjusted gross margin was 41.4%.

• Net income was $501 million ($1.38 diluted EPS); adjusted net income was $190 million ($0.52 adjusted EPS).

• Returned $726 million to shareholders year-to-date via dividends and share repurchases.

• Announced Michael Francis as incoming Old Navy President and CEO.

Financial highlights

• Adjusted gross margin was 41.4%, up 20 basis points year-over-year; merchandise margin expanded 80 basis points.

• Adjusted operating margin was 7.1%, down 70 basis points year-over-year; reported operating margin was 18.5%.

• Adjusted EPS was $0.52, down from $0.57 last year; GAAP EPS was $1.38, reflecting the one-time tariff benefit.

• Free cash flow year-to-date was $261 million; cash, equivalents, and short-term investments totaled $2.5 billion.

• Operating expenses were $1.3 billion, or 34.3% of net sales, up 90 basis points year-over-year.

Outlook and guidance

• Full-year net sales growth expected at 1%-1.5%, with comparable sales roughly in line.

• Adjusted operating margin outlook raised to 7.4%-7.6% for the full year.

• Adjusted EPS now expected at $2.35-$2.45, up 10%-15% year-over-year; reported EPS expected at $3.77-$3.87.

• Third quarter net sales expected to increase 1.5%-2.5% year-over-year.

• Old Navy comparable sales outlook updated to flat to down 1%; Gap brand expected to grow high-single to low double digits.