Gap Inc. (GAP) Stock Falls 13% After Q4 EPS Miss and Weak Old Navy Sales

TLDR

• GAP stock fell as much as 13% after Q4 earnings missed on key metrics
• EPS came in at $0.45, a penny below the $0.46 analyst estimate
• Old Navy comps rose just 3%, missing the 4.3% expected; Athleta sales fell 11%
• Gross margin dropped to 38.1%, partly due to a 200 basis point tariff hit
• Fiscal 2026 guidance of 2–3% revenue growth met but did not beat consensus

Gap Inc. reported its Q4 and full-year fiscal 2025 results on March 5, 2026. The numbers were mixed, and the market didn’t take it well.

EPS came in at $0.45, just one cent below the $0.46 analysts were expecting. Revenue hit $4.24 billion, which matched estimates — but matching isn’t the same as beating.

Net income fell to $171 million in Q4, down from $206 million in the same period a year ago. That’s a drop worth paying attention to.

The Gap, Inc., GAP

Gross margin landed at 38.1%, down 80 basis points year-over-year. A big reason for that squeeze was tariffs, which hit merchandise margin by roughly 200 basis points.

January’s historic winter storms didn’t help either. At their peak, around 800 Gap stores were temporarily closed. CFO Katrina O’Connell said sales bounced back quickly once the weather cleared — but the damage to the quarter was already done.

Old Navy, the company’s biggest brand, posted comp sales growth of just 3%. Analysts had penciled in 4.3%. For a brand that accounts for the bulk of Gap’s revenue, that gap matters.

Athleta continued its rough stretch. Comparable sales dropped 10% in Q4, and full-year comps were down 9%. Net sales for the brand fell 11% in the quarter to $354 million. Management said it remains “focused on rebuilding the brand for the long term.”

Gap Brand and Banana Republic Step Up

Not all the news was bad. The Gap brand itself had a strong quarter, with comparable sales up 7% — ahead of the 4.6% consensus estimate.

Banana Republic also delivered, posting comps up 4% and marking its third consecutive quarter of positive comp growth.

For the full year, Gap Inc. reported net sales of $15.4 billion, up 2%, and hit its eighth consecutive quarter of positive comparable sales. Operating income came in at $1.1 billion, with an operating margin of 7.3%.

The company ended the year with $3 billion in cash and generated $1.3 billion in operating cash flow. It also announced a new $1 billion share repurchase authorization.

Guidance Lands Flat

For fiscal 2026, Gap guided for revenue growth of 2% to 3% and adjusted EPS of $2.20 to $2.35 — both roughly in line with what analysts expected.

That’s not what investors wanted. After two years of steady recovery under CEO Richard Dickson, the market was looking for something to get excited about. In-line guidance didn’t deliver that.

One added wrinkle: the fiscal 2026 outlook was based on tariff rates in effect before February 20, 2026. Management said it’s too early to factor in more recent tariff changes — a cautious call, but one that leaves the guidance looking conservative.

Capital expenditure for fiscal 2026 is expected to rise to $650 million, up from $470 million in 2025. The board also approved a Q1 2026 dividend of $0.175 per share, a roughly 6% increase from Q4 2025.

The first quarter gross margin is expected to come in 150 to 200 basis points lower than a year ago, with an estimated 200 basis point tariff impact baked in.

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