Gap Inc (GAP) Q3 2025 earnings summary

Executive summary

• Net sales grew 2% year-over-year in Q3 2024 to $3.8 billion, marking the fourth consecutive quarter of growth and the seventh consecutive quarter of market share gains across all brands, with online sales up 7% and store sales down 2%.

• Operating margin improved by 270 basis points to 9.3%, the highest Q3 margin in seven years, with gross margin up 140 basis points to 42.7%.

• EPS rose 24% to $0.72 from $0.58 last year, and net income reached $274 million.

• All brands showed progress: Old Navy maintained market share gains, Gap posted positive comps, Banana Republic improved fundamentals, and Athleta returned to growth with a 5% comp increase.

• Raised full-year outlook for net sales, gross margin, and operating income growth.

Financial highlights

• Net sales: $3.8 billion (+2% YoY); comparable sales up 1%; online sales up 7%, store and franchise sales down 2%.

• Gross margin expanded to 42.7%, up 140 basis points year-over-year, driven by improved inventory management.

• Operating income was $355 million; operating expenses at $1.3 billion; free cash flow year-to-date reached $540 million.

• Cash and equivalents ended at $2.2 billion, up 64% from last year; short-term investments at $250 million.

• Inventory at quarter-end was $2.33 billion, down 2% year-over-year.

Outlook and guidance

• Fiscal 2024 net sales expected to increase 1.5% to 2.0% on a 52-week basis; 53rd week loss to impact sales by ~$160 million.

• Gross margin projected to expand by approximately 220 basis points for the full year.

• Operating income growth now expected in the mid to high 60% range compared to adjusted FY23.

• Full-year SG&A/operating expense expected at $5.1 billion; effective tax rate forecasted at approximately 26.5%; capital expenditures to be around $500 million.

• Board authorized a $0.15 per share dividend for Q4 2024.