olivLaw · US equity research
The Gap, Inc. GAP
Retail-Family Clothing Stores · SIC 5651 · Vertical: Retail-Family Clothing Stores (SIC 5651)
The Gap, Inc. is an American apparel retailer operating the Old Navy, Gap, Banana Republic and Athleta brands through company-operated stores, online and franchise channels. In the second quarter of fiscal 2026 it reported a gross margin far above the prior year, largely due to recovered tariffs, while net sales slipped slightly.
At the close of 04 Nov 2026, The Gap, Inc. (GAP) stock was 23.75 USD (+8.00% on the day), with market capitalisation 8.3 bn USD, P/E 7.1 on diluted EPS of 3.34 USD over the last 12 months, dividend yield 2.86%, beta 1.35, 52-week range 18.35–29.13 USD. Latest reported quarter (Q2 2027): revenue of 3.7 bn USD (−2.0% YoY), net income of 501.0 m USD (+131.9% YoY), diluted EPS 1.38 USD.
Data as of · AI analysis dated · Source: SEC filings and closing prices, computed by olivLaw.
Price history
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Technical reading
- RSI (14)
- 59.3
- strong (55–70)
- Bollinger (20, 2)
- 21.63 – 23.92
- in the upper half of the band · %B 0.93 · band width 10.1%
- SMA 50 / 200
- 22.28 / 23.06
- mixed trend
- MACD (12, 26, 9)
- 0.08 / 0.11
- MACD below signal
Indicators describe past prices; on their own they do not predict direction. On our history the RSI ≤ 40 filter added no return (see the signals methodology).
Performance
| Company | S&P 500 | vs S&P 500 | Vertical median | |
|---|---|---|---|---|
| 1 month | +1.9% | −1.1% | +3.0 pp | — |
| 3 months | +15.5% | −0.5% | +15.9 pp | — |
| 6 months | −3.3% | +4.4% | −7.7 pp | — |
| Year to date | −7.2% | +12.3% | −19.5 pp | — |
| 1 year | +6.0% | +13.5% | −7.6 pp | −4.7% |
| 3 years | +69.2% | +76.4% | −7.3 pp | +44.3% |
| 5 years | −4.6% | +63.7% | −68.3 pp | — |
Price returns, dividends excluded.
Quarterly results
Latest quarter: Q2 2027 · 01 Aug 2026
Quarterly margins
Quarterly statements · USD
| Fiscal year | Q3 '25 | Q4 '25 | Q1 '26 | Q2 '26 | Q3 '26 | Q4 '26 | Q1 '27 | Q2 '27 |
|---|---|---|---|---|---|---|---|---|
| Revenue | 3.8 bn | 4.1 bn | 3.5 bn | 3.7 bn | 3.9 bn | 4.2 bn | 3.5 bn | 3.7 bn |
| Cost of revenue | 2.2 bn | 2.5 bn | 2.0 bn | 2.2 bn | 2.3 bn | 2.6 bn | 2.1 bn | 1.7 bn |
| Gross profit | 1.6 bn | 1.6 bn | 1.4 bn | 1.5 bn | 1.7 bn | 1.6 bn | 1.4 bn | 1.9 bn |
| Operating income | 355.0 m | 259.0 m | 260.0 m | 292.0 m | 334.0 m | 229.0 m | 445.0 m | 676.0 m |
| Depreciation & amortisation | 124.0 m ≈ | 129.0 m | 121.0 m | 122.0 m ≈ | 125.0 m ≈ | 128.0 m | 128.0 m | 131.0 m ≈ |
| Interest expense | 23.0 m | 19.0 m | 23.0 m | 23.0 m | 23.0 m | 24.0 m | 22.0 m | 24.0 m |
| Pre-tax income | 361.0 m | 272.0 m | 263.0 m | 296.0 m | 337.0 m | 236.0 m | 450.0 m | 680.0 m |
| Income tax | 87.0 m | 66.0 m | 70.0 m | 80.0 m | 101.0 m | 65.0 m | 111.0 m | 179.0 m |
| Net income | 274.0 m | 206.0 m | 193.0 m | 216.0 m | 236.0 m | 171.0 m | 339.0 m | 501.0 m |
| Diluted EPS | 0.72 | 0.53 ≈ | 0.51 | 0.57 | 0.62 | 0.44 ≈ | 0.90 | 1.38 |
| Operating cash flow | 291.0 m ≈ | 616.0 m | -140.0 m | 448.0 m ≈ | 299.0 m ≈ | 686.0 m | 213.0 m | 337.0 m ≈ |
| Capex | 148.0 m ≈ | 117.0 m | 83.0 m | 98.0 m ≈ | 146.0 m ≈ | 143.0 m | 135.0 m | 154.0 m ≈ |
| Dividends paid | 57.0 m ≈ | 56.0 m | 61.0 m | 62.0 m ≈ | 62.0 m ≈ | 62.0 m | 63.0 m | 62.0 m ≈ |
| Share repurchases | 0 ≈ | 75.0 m | 70.0 m | 82.0 m ≈ | 0 ≈ | 3.0 m | 401.0 m | 200.0 m ≈ |
≈ derived quarter (cumulative difference / share-days average)
E/P over time
E/P = trailing-12-month diluted EPS / price at quarter end. E/P is the inverse of P/E and stays defined when earnings are negative.
Today's P/E sits at the 3 percentile of its own 32-quarter history (min 6.0, median 12.7, max 146.1; quarters with earnings only).
Fiscal years
| Fiscal year | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|---|---|---|---|
| Revenue | 16.6 bn | 16.4 bn | 13.8 bn | 16.7 bn | 15.6 bn | 14.9 bn | 15.1 bn | 15.4 bn |
| Revenue YoY | +4.6% | −1.2% | −15.8% | +20.8% | −6.3% | −4.7% | +1.3% | +1.9% |
| Net income | 1.0 bn | 351.0 m | -665.0 m | 256.0 m | -202.0 m | 502.0 m | 844.0 m | 816.0 m |
| Net income YoY | +18.3% | −65.0% | −289.5% | unavailable | −178.9% | unavailable | +68.1% | −3.3% |
| Diluted EPS | 2.59 | 0.93 | -1.78 | 0.67 | -0.55 | 1.34 | 2.20 | 2.13 |
| Diluted EPS YoY | +21.0% | −64.1% | −291.4% | unavailable | −182.1% | unavailable | +64.2% | −3.2% |
| net % | 6.0% | 2.1% | -4.8% | 1.5% | -1.3% | 3.4% | 5.6% | 5.3% |
| Free cash flow | 676.0 m | 709.0 m | -155.0 m | 115.0 m | -78.0 m | 1.1 bn | 1.0 bn | 823.0 m |
Reported results vs expectations
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Balance sheet & financial health
Fiscal year 2026 · 31 Jan 2026
- Cash
- 2.6 bn USD
- Financial debt
- 1.5 bn USD
- Net debt
- -1.1 bn USD
- Equity
- 3.8 bn USD
- Total assets
- 12.6 bn USD
- Debt / equity
- 0.39x
- Current ratio
- 1.75x
- ROE
- 23.1%
- ROA
- 6.7%
- FCF margin
- 5.4%
Financial statements (source on every figure)
Revenue and net income (USD)
Margins
Income statement · USD
| Line | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Source (latest year) |
|---|---|---|---|---|---|---|---|
| Revenue | 13.8 bn | 16.7 bn | 15.6 bn | 14.9 bn | 15.1 bn | 15.4 bn | SEC (XBRL)· 17 Mar 2026verified |
| Cost of revenue | 9.1 bn | 10.0 bn | 10.3 bn | 9.1 bn | 8.9 bn | 9.1 bn | SEC (XBRL)· 17 Mar 2026verified |
| Gross profit | 4.7 bn | 6.6 bn | 5.4 bn | 5.8 bn | 6.2 bn | 6.3 bn | SEC (XBRL)· 17 Mar 2026verified |
| Research & development | 46.0 m | 41.0 m | 46.0 m | 37.0 m | 40.0 m | 60.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Operating income | -862.0 m | 810.0 m | -69.0 m | 560.0 m | 1.1 bn | 1.1 bn | SEC (XBRL)· 17 Mar 2026verified |
| Depreciation & amortisation | 507.0 m | 504.0 m | 540.0 m | 522.0 m | 500.0 m | 496.0 m | SEC (XBRL)· 17 Mar 2026verified |
| EBITDA | -355.0 m ≈ | 1.3 bn ≈ | 471.0 m ≈ | 1.1 bn ≈ | 1.6 bn ≈ | 1.6 bn ≈ | SEC (XBRL)· 17 Mar 2026derived |
| Interest expense | 192.0 m | 167.0 m | 88.0 m | 90.0 m | 87.0 m | 93.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Pre-tax income | -1.1 bn | 323.0 m | -139.0 m | 556.0 m | 1.1 bn | 1.1 bn | SEC (XBRL)· 17 Mar 2026verified |
| Income tax | -437.0 m | 67.0 m | 63.0 m | 54.0 m | 293.0 m | 316.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Net income | -665.0 m | 256.0 m | -202.0 m | 502.0 m | 844.0 m | 816.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Diluted EPS | -1.78 | 0.67 | -0.55 | 1.34 | 2.20 | 2.13 | SEC (XBRL)· 17 Mar 2026verified |
| Weighted average diluted shares | 374.0 m | 383.0 m | 367.0 m | 376.0 m | 384.0 m | 384.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Dividend per share | 0.24 | 0.36 | 0.60 | 0.60 | 0.60 | 0.66 | SEC (XBRL)· 17 Mar 2026verified |
≈ computed by olivLaw from the reported lines of the same year: Operating income + Depreciation & amortisation.
Balance sheet · USD
| Line | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Source (latest year) |
|---|---|---|---|---|---|---|---|
| Cash | 2.0 bn | 877.0 m | 1.2 bn | 1.9 bn | 2.3 bn | 2.6 bn | SEC (XBRL)· 17 Mar 2026verified |
| Receivables | 363.0 m | 399.0 m | 340.0 m | 289.0 m | 301.0 m | 316.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Current assets | 6.0 bn | 5.2 bn | 4.6 bn | 4.4 bn | 5.2 bn | 5.8 bn | SEC (XBRL)· 17 Mar 2026verified |
| Property, plant & equipment, net | 2.8 bn | 3.0 bn | 2.7 bn | 2.6 bn | 2.5 bn | 2.5 bn | SEC (XBRL)· 17 Mar 2026verified |
| Goodwill | 109.0 m | 207.0 m | 207.0 m | 207.0 m | 207.0 m | 207.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Intangibles (excl. goodwill) | 0 | 36.0 m | 27.0 m | 18.0 m | 10.0 m | 4.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Total assets | 13.8 bn | 12.8 bn | 11.4 bn | 11.0 bn | 11.9 bn | 12.6 bn | SEC (XBRL)· 17 Mar 2026verified |
| Accounts payable | 1.7 bn | 2.0 bn | 1.3 bn | 1.3 bn | 1.5 bn | 1.6 bn | SEC (XBRL)· 17 Mar 2026verified |
| Long-term debt | 2.2 bn | 1.5 bn | 1.5 bn | 1.5 bn | 1.5 bn | 1.5 bn | SEC (XBRL)· 17 Mar 2026verified |
| Current liabilities | 3.9 bn | 4.1 bn | 3.3 bn | 3.1 bn | 3.3 bn | 3.3 bn | SEC (XBRL)· 17 Mar 2026verified |
| Equity | 2.6 bn † | 2.7 bn † | 2.2 bn † | 2.6 bn † | 3.3 bn † | 3.8 bn † | SEC (XBRL)· 17 Mar 2026verified |
† equity attributable to the parent's shareholders: in these years the issuer no longer reports the total including non-controlling interests.
Cash flow · USD
| Line | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Source (latest year) |
|---|---|---|---|---|---|---|---|
| Operating cash flow | 237.0 m | 809.0 m | 607.0 m | 1.5 bn | 1.5 bn | 1.3 bn | SEC (XBRL)· 17 Mar 2026verified |
| Capex | 392.0 m | 694.0 m | 685.0 m | 420.0 m | 447.0 m | 470.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Free cash flow | -155.0 m ≈ | 115.0 m ≈ | -78.0 m ≈ | 1.1 bn ≈ | 1.0 bn ≈ | 823.0 m ≈ | SEC (XBRL)· 17 Mar 2026derived |
| Investing cash flow | -510.0 m | -446.0 m | -227.0 m | -334.0 m | -692.0 m | -600.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Financing cash flow | 895.0 m | -1.5 bn | 6.0 m | -567.0 m | -321.0 m | -419.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Dividends paid | 0 | 226.0 m | 220.0 m | 222.0 m | 225.0 m | 247.0 m | SEC (XBRL)· 17 Mar 2026verified |
| Share repurchases | 0 | 201.0 m | 123.0 m | 0 | 75.0 m | 155.0 m | SEC (XBRL)· 17 Mar 2026verified |
≈ computed by olivLaw from the reported lines of the same year: Operating cash flow − Capex.
Computed indicators
Growth
Profitability
Returns
Balance sheet
Liquidity
Cash
Efficiency
Market and valuation
1 indicators that do not apply to the sector.
Valuation
olivLaw classification
Score: 82 / 100
A scoring methodology on indicators and valuation, not investment advice.
score >= 65 · margin_of_safety >= 0.15 · agreement in ['high', 'medium']
Closing price
04 Nov 2026Source: olivLaw, closing series
Market cap: 8.3 bn USD
Key indicators
Coverage and freshness
Score by group
- Valuation95
- Returns100
- Quality73
- Balance sheet97
- Growth0
Estimated value range
The combined range = the median of the valid methods' low, central and high values; it is not a probability interval and does not cover every result. Envelope of all methods: 36.65 – 88.71 USD.
Methods computed but outside the aggregate range: Dividend discount (DDM) (a small share of earnings is paid as dividends (capital returns through buybacks): the dividend model does not describe the value and stays outside the aggregate).
Valuation assumptions are editorial choices, not measured; beta is not measured.
Method ranges (USD per share)
— — Mid · ▏ Price
Valuation methods
- DCF (discounted cash flow)39.27 – 61.80 (Mid 47.76)WACC 8.6% · starting FCFF 1.0 bn USD · terminal value share of EV 75%The WACC × g sensitivity gives the method's bounds; these are not probabilities.Reverse DCF: starting growth implied by the price (fading linearly to terminal growth, everything else fixed): -28.6%
- Peers: EV/EBITDA45.09 – 88.71 (Mid 55.39)3 companies used · median multiple 8.6x · quartiles 6.9x – 13.9xAEO, LE, ROST
- Peers: P/E36.65 – 69.16 (Mid 47.77)7 companies used · median multiple 14.3x · quartiles 11.0x – 20.7xAEO, ANF, BKE, LE, ROST, TJX, URBN
- Dividend discount (DDM)outside the aggregate8.67 – 11.66 (Mid 9.95)a small share of earnings is paid as dividends (capital returns through buybacks): the dividend model does not describe the value and stays outside the aggregate
Classification (SIC) comparables group by industry code, not by economic activity; the direct group is an editorial selection by activity. Members' multiples are on their own trailing twelve months, at their own latest close.
Assumptions (illustrative, editorial)
- Risk-free rate
- 4.3%
- Equity risk premium
- 5.0%
- Beta (default)
- 1.00
- Cost of equity
- 9.3%
- Terminal growth
- 2.5%
Factor scorecard
Attractive profile · Score 82/100
| Factor | Value | Score | Weight used |
|---|---|---|---|
| ROIC · Quality | 40.6% | 100 (on a fixed band) | 11% |
| Net margin · Quality | 8.1% | 33 (vs peers) | 7% |
| FCF conversion · Quality | 76.7% | 67 (on a fixed band) | 7% |
| Revenue CAGR 3Y · Growth | -0.5% | 0 (on a fixed band) | 9% |
| EPS CAGR 3Y · Growth | unavailable | unavailable | — |
| Net debt / EBITDA · Balance sheet | -0.3x | 100 (on a fixed band) | 11% |
| Interest coverage · Balance sheet | 18.1x | 100 (on a fixed band) | 7% |
| Current ratio · Balance sheet | 1.8x | 85 (on a fixed band) | 5% |
| P/E (TTM) · Valuation | 7.1x | 86 (vs peers) | 11% |
| EV/EBITDA · Valuation | 3.5x | 100 (on a fixed band) | 11% |
| FCF yield · Valuation | 11.5% | 100 (on a fixed band) | 9% |
| Shareholder yield (distributions) · Returns | 10.2% | 100 (on a fixed band) | 7% |
| Payout ratio (FCF) · Returns | 26.0% | 100 (on a fixed band) | 5% |
Factors without a value were dropped; the remaining weights were renormalised.
Score groups
- Balance sheet97/100 · 3/3 factors with a value
- Growth· partial0/100 · 1/2 factors with a value
- Quality73/100 · 3/3 factors with a value
- Returns100/100 · 2/2 factors with a value
- Valuation95/100 · 3/3 factors with a value
A «partial» group is computed from under half of its weight or from one factor: it is not a full assessment of the group.
Memo
GAP, INC (GAP). Latest full fiscal year: 2026; data up to 2026-08-01.
Figures computed from the financial statements: revenue 15.4 bn USD in 2026; YoY growth 1.9%; net margin 8.1%; ROE 33.8%; net debt/EBITDA -0.3x.
The estimated value range is 39.27–69.16 USD per share (median of 3 methods, agreement: high); assumptions are illustrative. Against the central value of 47.77 USD, the price of 23.75 USD leaves a potential of 101.1% (value / price − 1) and a margin of safety of 50.3% (1 − price / value). The range is the median of the methods' low, central and high values, not a probability interval.
olivLaw score 82/100, methodological classification: attractive profile (score, margin of safety and method agreement together; not a judgement of the right price). Groups assessed only in part: growth. Not investment advice.
Text generated deterministically from the figures shown; no language model. Not investment advice.
What supports the thesis
- ROIC: 40.6%
- Net debt / EBITDA: -0.3x
- Interest coverage: 18.1x
- Current ratio: 1.8x
- P/E (TTM): 7.1x
- EV/EBITDA: 3.5x
- FCF yield: 11.5%
- Shareholder yield (distributions): 10.2%
- Payout ratio (FCF): 26.0%
- The price is below the estimated value range
What contradicts it
- Revenue CAGR 3Y: -0.5%
Not assessed (insufficient data or a ratio without meaning): EPS CAGR 3Y.
Versus the vertical median
Retail-Family Clothing Stores (SIC 5651) · same industry (4-digit SIC) · compared with 9 companies
Multiples and returns vs the median
Price rebased to 100 (monthly, 5 years)
Companies in the vertical
| Market cap | P/E | ROE | Net margin | Revenue YoY | 1A / 3A | |
|---|---|---|---|---|---|---|
| TJXThe TJX Companies, Inc. | 159.2 bn | 26.8 | 62.2% | 9.7% | +7.1% | −5% / +64% |
| ROSTRoss Stores, Inc. | 78.5 bn | 29.7 | 42.6% | 10.8% | +7.7% | +39% / +88% |
| GAPGap, Inc | 8.3 bn | 7.1 | 33.8% | 8.1% | +1.9% | +6% / +69% |
| URBNUrban Outfitters, Inc. | 7.9 bn | 14.3 | 20.9% | 8.8% | +11.1% | +24% / +157% |
| ANFAbercrombie & Fitch Co. | 7.3 bn | 14.7 | 40.5% | 10.0% | +6.4% | +75% / +125% |
| AEOAmerican Eagle Outfitters, Inc. | 3.6 bn | 10.9 | 20.4% | 5.9% | +4.1% | +5% / +12% |
| BKEBuckle, Inc | 2.5 bn | 11.0 | 45.8% | 16.6% | +6.6% | −15% / +24% |
| LELands’ End, Inc. | 301.1 m | 0.9 | 97.9% | 30.5% | +0.7% | −35% / +44% |
| DXLGDestination Xl Group, Inc. | 27.1 m | — | -30.6% | -8.8% | −6.9% | −50% / −87% |
| PLCEThe Children’s Place, Inc. | 5.4 m | — | — | -11.8% | −12.8% | −97% / −99% |
1- and 3-year price returns: for GAP from daily closes (the same as the performance table), for the other companies from month-end closes.
olivLaw engine forecast
The world engine ran after the company's latest material disclosure. Probabilities are of TOUCHING a level within the horizon (not closing there) and sit next to the random walk (p_rw), the no-information benchmark.
The engine has no published run for this company yet.
Valuation scenarios (editable assumptions)
Illustrative scenarios
Illustrative: not forecasts and without probabilities. Each case is one coherent set of assumptions, computed on today's figures.
Estimated price (USD)
| Estimated price | Bear | Base | Bull |
|---|---|---|---|
| 1 years | 14.17 Total return -38% · Per year -38% | 25.12 Total return 9% · Per year 9% | 37.92 Total return 63% · Per year 63% |
| 3 years | 12.40 Total return -41% · Per year -16% | 24.85 Total return 14% · Per year 4% | 41.39 Total return 86% · Per year 23% |
| 5 years | 10.84 Total return -44% · Per year -11% | 24.58 Total return 18% · Per year 3% | 45.16 Total return 110% · Per year 16% |
- Exit P/E± 6.21
- Net margin± 4.35
- Annual revenue growth± 3.75
- Annual dilution± 0.37
AI analysis
AI-generatedAI-generated analysis (Claude) from cited public sources; it may contain errors. Not investment advice. As of 27 Oct 2026 · Model: claude-haiku-5-5.
In brief
The Gap, Inc. is an American apparel retailer operating the Old Navy, Gap, Banana Republic and Athleta brands through company-operated stores, online and franchise channels. In the second quarter of fiscal 2026 it reported a gross margin far above the prior year, largely due to recovered tariffs, while net sales slipped slightly 3.
SWOT
Strengths
- A portfolio of four recognised brands with a strong omni-channel presence and a shared supply chain and technology structure.
- Visible operational discipline in gross margin and cost management, according to the second-quarter results.
- A solid liquidity position and the capacity to return capital to shareholders through dividends and share repurchases.
Weaknesses
- Reliance on vendors in a few countries makes the supply chain vulnerable to disruption and tariff changes.
- Comparable sales at some brands, especially Old Navy and Athleta, are declining, pointing to relevance problems.
- Higher inventory and more intense promotions could erode margins in coming quarters.
Opportunities
- Extending the beauty and accessories categories and using the Encore loyalty programme to deepen engagement with existing customers.
- Growing international franchise and licensing, which could widen reach without large investment in company-operated stores.
- Using AI and customer data to improve assortment and store-level inventory allocation.
Threats
- Trade policies and tariffs may be reintroduced or changed, affecting costs and margins.
- A slowdown in discretionary spending amid economic and geopolitical uncertainty could reduce sales.
- Digital competition and discount retailers may pressure prices and traffic.
Risks
- Tariffs and trade policyhigh
Changes in tariffs can raise product costs or disrupt supply, and the timing and amount of recoveries remain uncertain 12.
- Discretionary consumer spendinghigh
If consumer confidence falls, spending on apparel could slow, especially in value categories.
- Inventory managementmedium
Misjudging demand can lead to markdowns and inventory write-downs, hurting margins 1.
- Brand relevancemedium
Declining comparable sales at Old Navy and Athleta show that staying relevant remains a challenge 3.
- Dependence on foreign vendorsmedium
Concentration of production in a few countries exposes the company to geopolitical risk, port disruption and currency swings 1.
Investment thesis
What would need to be true (bull case)
- Strong growth at the Gap brand and a recovering gross margin show that operational execution can support profitability even with slightly lower sales 3.
- The revised adjusted earnings-per-share outlook suggests that cost discipline and financial rigour could last if demand stabilises 3.
- Commitment to dividends and share repurchases, alongside a liquid balance sheet, provides a cushion in uncertain periods 3.
What would break the thesis
- Declining comparable sales at Old Navy, the largest brand, could point to structural problems with traffic and assortment 3.
- A significant part of second-quarter margin came from tariff recoveries, which are non-recurring and can mask a more modest adjusted margin 3.
- If tariffs or consumer demand worsen, the outlook could be revised again and margin pressure could return 12.
What to watch
- Trajectory of comparable sales at Old Navy and the effect of corrective actionsQ3 2026
- Timing and final amount of the IEEPA tariff refundsQ3 2026
- Delivery of the adjusted earnings-per-share outlook for fiscal 2026next 10-K
- Impact of the new Section 301 tariffs on gross margin2027
Products, market & competition
AI-generatedAI-generated analysis (Claude) from cited public sources; it may contain errors. Not investment advice. As of 27 Oct 2026 · Model: claude-haiku-5-5.
The business
The company sells apparel, accessories and personal care products for men, women and children, both in stores and online, through company-operated and franchise stores and third-party arrangements 1. At the end of fiscal 2025 it had 2,474 company-operated stores, mainly in the United States, Canada, Japan and Taiwan, and about 1,000 franchise stores 1. Net sales for fiscal 2025 were 15.4 billion USD 1.
The model is omni-channel: buy online pick-up in store, order-in-store, ship-from-store and mobile experiences, supported by shared investments in supply chain and technology 1. The loyalty program was rebranded as Encore in the first quarter of fiscal 2026, with a focus on personalisation and first-party customer data 1.
Production is outsourced: almost all products are made by independent vendors outside North America, with large shares of purchases from Vietnam and Indonesia 1. Sales are seasonal, peaking in the year-end holiday period 1.
Segments
Old Navy
Old Navy is the value brand and the largest by sales. In the second quarter of fiscal 2026 its sales fell and comparable sales declined, the company citing pressure in the women's seasonal assortment and an unexpected slowdown in traffic 3.
Gap
The Gap brand was the main growth driver in the second quarter of fiscal 2026, with double-digit comparable sales growth supported by denim, fleece and kids and baby categories 3.
Banana Republic and Athleta
Banana Republic grew slightly in the second quarter, while Athleta, the women's performance brand, saw comparable sales fall and is being rebuilt to profitability 3.
Market context
Apparel retail is highly competitive, with low barriers to entry that allow new competitors and products to appear quickly 1. Macroeconomic pressures, including geopolitical instability, inflation and trade policy, shape consumer demand and can shift seasonality 12.
The pace of trend change, the shift to digital distribution and price pressure mean that success depends on managing inventory and marketing well 1.
Trends
- Tariffs and their recoverymixed
US tariffs raised cost of goods sold in fiscal 2025, and some IEEPA tariffs were later recovered. The outlook remains uncertain because new tariffs replaced the temporary ones 123.
- Online growth and omni-channeltailwind
Online sales are growing while store sales are weaker; if this continues, lower occupancy costs could support margins over time 13.
- Pressure on discretionary spendingheadwind
Inflation, economic uncertainty and lower consumer confidence could reduce discretionary spending, directly affecting apparel sales 1.
- Marketing personalisation and AImixed
Investments in AI, first-party data and the Encore programme aim at higher customer relevance, but results are not assured and depend on execution 1.
Competitive position
Gap Inc. competes with local, national and global retailers, including department stores, mass-market retailers, specialty and discount chains, and digital businesses selling similar merchandise 1. The company must respond quickly to changing trends and offer competitive prices 1.
The brands' strengths are recognition and a portfolio spanning several age and price segments, but some competitors may spend more on marketing, which could give them an advantage 1.
- Global apparel and department stores
The sources generally name department stores and mass-market retailers as direct competition without naming specific companies.
- Specialty apparel chains
Specialty chains selling similar product lines to the Gap Inc. brands, referred to generically in the competitive risk discussion.
- Discount and mass-market retailers
Competitors in the value segment, most relevant to Old Navy, according to the general description in the filing.
- Digital apparel businesses
Online platforms selling similar lines, competing for traffic and for customers in the digital channel.
Links, dependencies and risks
Who the company is tied to, from its own SEC filings (customers, suppliers, production, partners, competitors, countries, regulation), from the 5 %+ holders' statements (13D/13G) and from what other companies say about it. Click a node for its evidence; on a listed company the graph moves to it.
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News & filings
In the press
No news in our archive over the last 180 days.
SEC filings
- Current report15 Sept 2026Departure or appointment of officers
- Quarterly report28 Aug 2026
- Current report27 Aug 2026Results of operations · Departure or appointment of officers · Regulation FD disclosure · Financial statements and exhibits
- Current report21 Jul 2026Material agreement · Creation of a direct financial obligation · Financial statements and exhibits
- Quarterly report29 May 2026
- Current report28 May 2026Results of operations · Financial statements and exhibits
- Current report15 May 2026Shareholder vote
- Proxy statement27 Mar 2026
- Annual report17 Mar 2026
- Current report12 Mar 2026Other events · Financial statements and exhibits
Sources
- [1] Form 10-K, fiscal year ended 2026-01-31 · SEC / The Gap, Inc. · 17 Mar 2026
- [2] Form 10-Q, quarter ended 2026-08-01 · SEC / The Gap, Inc. · 28 Aug 2026
- [3] Form 8-K, results release (exhibit 99.1) · SEC / The Gap, Inc. · 27 Aug 2026
Figures computed by olivLaw from SEC filings and closing prices; the qualitative analysis is AI-generated from cited sources. Not investment advice.