Gap Inc (GAP) investor relations material

Executive summary

• Net sales increased 1% year-over-year to $3.5 billion, marking the ninth consecutive quarter of positive comparable sales, with comps up 2%.

• Gross margin reached 40.5%, exceeding outlook despite a 130 basis point decrease from last year.

• Net income was $339 million ($0.90 diluted EPS), driven by a $313 million legal settlement gain and a $50 million charitable donation.

• Returned $464 million to shareholders via share repurchases and dividends, with strong cash reserves of $2.6 billion, up 15% year-over-year.

• Raised full-year adjusted EPS outlook to $2.30–$2.40, with GAAP EPS outlook at $2.83–$2.93.

Financial highlights

• Operating income was $445 million (12.7% margin); adjusted operating income was $182 million (5.2% margin), excluding the legal settlement and donation.

• Adjusted EPS was $0.38, down from $0.51 last year; reported EPS was $0.90.

• Free cash flow was $78 million; net cash from operations was $213 million.

• Inventory levels were flat year-over-year at $2.1 billion, with units down.

• Operating expense was $972 million (27.8% of net sales); adjusted $1.2 billion (35.3%).

Outlook and guidance

• FY26 net sales expected to rise 1–2% year-over-year; gross margin flat to up slightly.

• Adjusted operating margin forecasted at 7.3–7.5%; adjusted diluted EPS $2.30–$2.40.

• Q2 net sales expected flat to down 1% year-over-year; gross margin flat to down 50 bps.

• Tariff relief expected to benefit gross and operating margins by ~$80 million, mainly in Q2 and Q3.

• Dividend of $0.175 per share authorized for Q2 FY2026.