The Gap Inc (GAP) Q2 2025 earnings summary

Executive summary

• Net sales rose 5% year-over-year to $3.7 billion, marking the sixth consecutive quarter of market share gains, with comparable sales up 3% and strong performance at Old Navy and Gap.

• Gross margin expanded by 500 basis points to 42.6%, and operating margin improved to 7.9%.

• EPS increased to $0.54 from $0.32 last year, reflecting improved profitability.

• Inventory levels decreased 5% year-over-year, and cash and short-term investments ended at $2.1 billion, up 59%.

• Online sales grew 7% and store sales rose 4% compared to the prior year.

Financial highlights

• Net sales reached $3.7 billion, up 5% year-over-year; comparable sales up 3%.

• Gross margin improved to 42.6%, up 500 basis points; operating margin rose to 7.9%, up 490 basis points.

• Operating income was $293 million; net income was $206 million; EPS was $0.54, up from $0.32 last year.

• Free cash flow for the quarter was $397 million, up from $329 million a year ago.

• Inventory ended at $2.11 billion, down 5% year-over-year.

Outlook and guidance

• Fiscal 2024 net sales expected to be up slightly on a 52-week basis, with a negative $160 million impact from the loss of the 53rd week.

• Gross margin expansion for the year now expected at approximately 200 basis points.

• Operating income growth outlook raised to mid- to high-50% range over last year’s adjusted operating income.

• Q3 net sales expected to be up slightly; gross margin to improve by 50–75 basis points.

• Capital expenditures for FY 2024 targeted at approximately $500 million.