Key Stats for Gap Stock
- Pre-market Price Change for Gap stock: 3.5%
- $GAP Share Price as of Nov. 20: $23
- 52-Week High: $29
- $GAP Stock Price Target: $26
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What Happened?
Gap (GAP) stock is up almost 5% in pre-market after the apparel retailer delivered a standout third quarter that crushed Wall Street expectations.
The company posted earnings of $0.62 per share, beating analyst estimates of $0.59, while revenue came in at $3.94 billion, topping the $3.90 billion consensus.
The real headline was comparable sales growth of 5%, above analyst expectations of 3.1%. Setting aside pandemic-related spikes, this marks Gap’s strongest quarterly comp growth since the 2017 holiday season, which has now posted seven consecutive quarters of positive comps.
Gap’s namesake brand delivered a viral hit with its “Better in Denim” campaign featuring pop group Katseye.
The campaign generated over 8 billion impressions and 500 million views, fueling a 7% comparable sales increase at the Gap banner.
That crushed analyst expectations of 3.2% growth as the campaign helped Gap climb to the number six adult denim brand in the U.S., up from eighth place last year.
Old Navy also had a strong quarter with comparable sales up 6%, beating the 3.8% estimate. Sales rose 5% to $2.3 billion as the brand continued to gain share across key categories such as denim, activewear, kids, and baby.
CEO Richard Dickson said customers across all income cohorts are responding to Old Navy’s value proposition, even amid macro pressure on lower-income consumers.
Banana Republic posted its second consecutive quarter of positive comps, up 4% versus expectations of 3.2%. The one weak segment was Athleta, where both sales and comps fell 11%.
Dickson acknowledged disappointment but emphasized the brand is in a reset year under new leadership.
Gap’s gross margin fell 0.3 percentage points to 42.4% due to tariffs, but still beat expectations of 41.2%.
CFO Katrina O’Connell said the company absorbed an estimated 190 basis point hit from tariffs in the quarter, but offset much of that impact through higher full-price selling and lower discounting. The company raised prices selectively in categories like denim where demand was strong.
For the full year, Gap stock got another boost as management raised guidance and the company now expects sales growth at the high end of its prior range of 1.7% to 2%.
Operating margin guidance increased to around 7.2% from the prior range of 6.7% to 7%, even with tariff headwinds of 100 to 110 basis points.
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What the Market Is Telling Us About Gap Stock
The market’s positive reaction to GAP stock shows confidence in its brand turnaround strategy under Dickson’s leadership.
While competitors face soft apparel demand and cautious consumers, Gap is winning by driving cultural relevance through viral marketing campaigns, strategic partnerships, and improved product quality.
Investors seem encouraged by several factors.
- First, Gap’s ability to grow across all income cohorts demonstrates the strength of its value proposition.
- Second, higher full-price selling and lower discounting show the company’s brands have pricing power.
- Third, the diversified portfolio provides a hedge in uncertain times, with Old Navy capturing value-seekers while Gap brand appeals to younger, trend-focused shoppers.
Gap stock looks well-positioned heading into the holiday season and management expressed confidence about early holiday trends, and the company’s inventory is well-aligned with sales expectations.
While Athleta remains a work in progress, the strength across Gap’s three largest brands provides a solid foundation for continued momentum.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
