SAN FRANCISCO, March 6, 2026, 02:31 PST 1
Gap warned U.S. tariffs will squeeze profit this quarter and gave a 2026 earnings outlook whose midpoint sits below Wall Street estimates, sending its shares down 7% in extended trading after the apparel retailer reported fourth-quarter results on Thursday. 2
The miss matters now because chief executive Richard Dickson had started to steady the business. Gap posted its eighth straight quarter of positive comparable sales, but the new tariff hit and another slide at Athleta showed the recovery is still uneven. 3
The pressure is not only Gap’s. American Eagle and Abercrombie & Fitch have also flagged tariff pressure on margins and plans for the year, underscoring how exposed apparel groups remain to swings in trade policy. 2
Fourth-quarter net sales rose 2% to $4.2 billion. Comparable sales — demand at established stores and online channels — rose 3%, while online sales climbed 5% and made up 42% of the total. 3
Gross margin — the share of revenue left after product costs — fell 80 basis points, or 0.8 percentage point, to 38.1%. Gap said tariffs were the main drag, and diluted earnings came in at 45 cents a share.
For fiscal 2026, Gap expects net sales to rise 2% to 3% and adjusted earnings, which exclude certain items, of $2.20 to $2.35 a share. The midpoint of that range is below analysts’ average estimate of $2.32, and the company said the forecast was based on tariff rates in effect before Feb. 20, leaving later court and policy changes outside the guide. 1
Finance chief Katrina O’Connell said changes in global tariff rates in 2025 had “a substantial impact” on profit. Gap expects first-quarter gross margin to fall about 150 to 200 basis points, including a 200-basis-point, or two-percentage-point, hit from tariffs. 2
The split across Gap’s brands was stark. Old Navy sales rose 3% in the quarter, the Gap brand gained 8% and Banana Republic added 1%, but Athleta sales fell 11% and comparable sales dropped 10%. 3
Dickson said execution of the company’s “playbook” was driving “consistent results.” Gap also approved a new $1 billion share repurchase program and raised its first-quarter dividend by about 6%, even as it plans to lift capital spending to about $650 million this year from $470 million in fiscal 2025.
Sky Canaves, an analyst at eMarketer, said U.S. trade policy uncertainty was “the single biggest force” behind pressure across the sector. Gap sources about 46% of its products from Southeast Asia, including Vietnam and Indonesia, and has been shifting sourcing and lifting some prices, including denim, to offset the tariff hit. 2
But the near-term risk is plain: Athleta remains weak while lower-income households hold out for discounts. Gap’s holiday-quarter same-store sales rose 3%, just shy of estimates, and inventory rose 7%, largely because tariffs pushed product costs higher. 2
