Key Stats for GAP Stock
- Today’s Price Change: -20%
- Current Share Price: $22
- 52-Week High: $31
- GAP Stock Price Target: $28
What Happened?
Gap (GAP) stock plummeted over 20% on Friday despite reporting first-quarter earnings that beat analyst expectations on both revenue and earnings per share. The dramatic decline in GAP stock followed the apparel retailer’s disclosure that new tariffs could significantly impact its business operations and profitability.
In fiscal Q1, Gap reported adjusted earnings of $0.51 per share, exceeding expectations of $0.46 per share, while revenue of $3.46 billion surpassed estimates of $3.42 billion.
Gap delivered 2% comparable sales growth, essentially in line with expectations. Strong performance from its Old Navy and Gap brands offset continued struggles at Banana Republic and Athleta.
However, the positive quarterly results were overshadowed by management’s warning about the financial impact of new tariff policies.
Gap disclosed that new 30% duties on imports from China and 10% levies on imports from most other countries could cost the company between $250 million and $300 million without mitigation efforts.
Even after implementing cost reduction strategies, the company expects a net impact of $100-$150 million, which is likely to be felt in the second half of the year.
The tariff exposure is concerning given Gap’s global supply chain footprint. While the company has reduced its China sourcing to less than 3% by year-end from under 10% previously, it remains heavily dependent on Vietnam and Indonesia, which accounted for 27% and 19% of production, respectively in fiscal 2024.
See Gap’s full analyst estimates, earnings results, and earnings transcript (It’s free) >>>
What the Market Is Telling Us
The severe decline in GAP stock reflects investor concerns that tariff pressures could derail ongoing turnaround efforts under CEO Richard Dickson.
Despite operational progress with Gap and Old Navy brands showing momentum, the tariff exposure threatens to offset these gains and create new headwinds for profitability.
Investors appear concerned about Gap’s weaker-than-expected gross margin guidance of 41.8% compared to the 42.5% that analysts had anticipated.
The market reaction suggests skepticism about Gap’s ability to fully mitigate the impacts of tariffs through supply chain diversification and domestic sourcing initiatives.
While CEO Dickson emphasized plans to increase U.S. cotton purchases and expressed confidence that “strong brands can win in any market,” investors are questioning whether these measures will be sufficient to offset the substantial cost increases.
However, Gap’s underlying business performance remains solid, with the company maintaining its full-year sales growth guidance of 1-2% despite the uncertainty surrounding tariffs.
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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!
