The 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.

• Gross margin expanded by 140 basis points to 42.7%, and operating margin improved by 270 basis points to 9.3%, the highest Q3 margin in seven years.

• EPS increased 24% to $0.72 compared to Q3 last year, with net income reaching $274 million and an effective tax rate of 24%.

• Online sales rose 7% year-over-year, now representing 40% of total net sales, while store and franchise sales declined 2%.

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

Financial highlights

• Q3 net sales: $3.8 billion (+2% YoY); comparable sales up 1%; gross margin: 42.7% (+140bps YoY); operating margin: 9.3% (+270bps YoY).

• EPS: $0.72 (vs. $0.58 last year); net income: $274 million; free cash flow: $540 million year to date.

• Cash, cash equivalents, and short-term investments: $2.2 billion, up 64% year-over-year.

• Operating income: $355 million; operating expenses: $1.3 billion.

• Dividend: $0.15 per share for Q3 and approved for Q4; $169 million returned to shareholders year to date.

Outlook and guidance

• Full-year net sales expected to grow 1.5%-2% year-over-year on a 52-week basis; loss of the 53rd week to impact sales by ~$160 million.

• Full-year gross margin projected to expand by approximately 220 basis points versus 2023.

• Operating income growth expected in the mid to high 60% range versus last year's adjusted operating income.

• Full-year SG&A/operating expenses expected at approximately $5.1 billion; effective tax rate forecasted at ~26.5%.

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