Gap Inc (GAP) Q3 2026 earnings summary

Executive summary

• Net sales for Q3 2025 rose 3% year-over-year to $3.9 billion, with comparable sales up 5% for the seventh consecutive positive quarter; Old Navy, Gap, and Banana Republic posted strong comps, while Athleta declined.

• Gross margin reached 42.4%, exceeding expectations but down 30 basis points year-over-year due to tariffs; operating margin was 8.5%.

• Operating income was $334 million, net income $236 million, and diluted EPS $0.62, down from $0.72 last year, mainly due to tariffs.

• Cash, cash equivalents, and short-term investments totaled $2.5 billion, up 13% year-over-year.

• Full-year net sales and operating margin outlooks were raised to the high end of prior guidance.

Financial highlights

• Net sales: $3.9 billion (+3% YoY); comparable sales: +5% YoY.

• Gross margin: 42.4% (-30 bps YoY); operating margin: 8.5% (-80 bps YoY, including 190 bps tariff impact).

• EPS: $0.62 (down from $0.72 last year); effective tax rate: 30%.

• Free cash flow year-to-date: $280 million; capital expenditures: $327 million.

• Inventory up 5% year-over-year, mainly due to tariffs.

Outlook and guidance

• Full-year 2025 net sales growth expected at 1.7%-2.0%, at the high end of prior guidance.

• Operating margin guidance increased to about 7.2% for the full year, including 100–110 basis points of tariff impact.

• Gross margin outlook raised, with expected deleverage of about 50 basis points year-over-year due to tariffs.

• Effective tax rate outlook raised to 28%-30%.

• CapEx planned at $500–$550 million; net store closures of about 35 expected.