The Gap Inc (GAP) investor relations material

Executive summary

• Fiscal 2025 net sales grew 2% year-over-year to $15.4 billion, with comparable sales up 3% and eight consecutive quarters of positive comps.

• Operating income reached $1.1 billion for the year, with an operating margin of 7.3%, and gross margin at 40.8%, among the highest in 25 years.

• Ended 2025 with $3 billion in cash, the highest in nearly two decades, and generated $823 million in free cash flow.

• Board approved a 6% increase in Q1 dividend and a new $1 billion share repurchase authorization.

• Online sales increased 4% and represented 39% of total net sales for the year.

Financial highlights

• Q4 net sales were $4.2 billion, up 2% year-over-year; full-year net sales were $15.4 billion, up 2%.

• Q4 gross margin was 38.1%, down 80 basis points due to tariffs; full-year gross margin was 40.8%, down 50 basis points.

• Q4 operating margin was 5.4%, down 80 basis points; full-year operating margin was 7.3%.

• Q4 EPS was $0.45 (vs. $0.54 prior year); full-year EPS was $2.13 (vs. $2.20 prior year).

• Free cash flow was $823 million; operating cash flow $1.3 billion; capital expenditures were $470 million.

Outlook and guidance

• Fiscal 2026 net sales expected to grow 2–3% year-over-year, with continued comp growth at Old Navy, Gap, and Banana Republic; Athleta expected to decline mid to high single digits in H1.

• Gross margin for 2026 expected to be flat to slightly up versus 2025; tariff impact expected to be net neutral for the year.

• Adjusted operating margin guidance for 2026 is 7.3%-7.5%; adjusted EPS expected at $2.20-$2.35, excluding legal settlement and donation.

• Reported EPS $2.71-$2.86 includes a $0.51 net benefit from a legal settlement and $50 million charitable donation.

• Q1 2026 net sales expected up 1%-2% year-over-year; gross margin down 150-200 basis points due to tariffs.