The Gap Inc (GAP) Q1 2026 earnings summary

Executive summary

• Net sales rose 2% year-over-year to $3.5 billion, with comparable sales up 2% and online sales up 6%, marking the ninth consecutive quarter of market share gains, led by Old Navy and Gap brands.

• Gross margin expanded 60 basis points to 41.8%, and operating margin improved 140 basis points to 7.5%, with EPS up 24% to $0.51.

• Net income for Q1 was $193 million, up from $158 million last year.

• Cash, cash equivalents, and short-term investments reached $2.2 billion, up 28% year-over-year.

• Inventory increased 7% year-over-year due to earlier receipts and faster transit times.

Financial highlights

• Net sales: $3.5 billion, up 2% year-over-year; online sales up 6%, store/franchise sales flat.

• Gross margin: 41.8%, up 60 basis points year-over-year; operating margin: 7.5%, up 140 basis points.

• Net income: $193 million; diluted EPS: $0.51, up from $0.41 last year.

• SG&A/OPEX: $1.2 billion, flat year-over-year, representing 34.3% of net sales.

• Free cash flow was negative $223 million, reflecting higher inventory and compensation payments.

Outlook and guidance

• Fiscal 2025 net sales expected to rise 1%-2% year-over-year; operating income projected to grow 8%-10% excluding tariff impacts.

• Tariffs could have a net impact of $100–$150 million on operating income, mainly in the second half.

• Q2 net sales expected to be flat year-over-year; gross margin to remain similar to Q1.

• Capital expenditures for fiscal 2025 estimated at $600 million; approximately 35 net store closures planned.

• Management continues to monitor macroeconomic uncertainty and evaluate mitigating actions.