Gap Inc. reported fiscal third‑quarter 2025 revenue of $3.94 billion, up 3 % from $3.80 billion a year earlier, and earnings per share of $0.62, beating the consensus estimate of $0.58 by $0.04 or 6.9 %. The earnings beat was driven by disciplined cost management and a favorable mix shift toward higher‑margin Gap and Old Navy stores, which offset the impact of a 190‑basis‑point tariff increase on merchandise costs.
Comparable sales grew 5 % year‑over‑year, the seventh consecutive quarter of positive growth. Old Navy’s net sales rose to $2.30 billion, up 5 % YoY, with comparable sales up 6 %. Gap brand sales reached $951 million, up 6 % YoY, and Banana Republic net sales were $464 million, down 1 % YoY but with comparable sales up 4 %. Athleta, however, posted an 11 % decline in net sales and comparable sales, reflecting the ongoing strategic reset at the brand.
Gross margin fell 30 basis points to 42.4 % from 42.7 % a year earlier. The compression was largely due to the tariff increase, but underlying merchandise margin expansion—driven by higher average unit retail and reduced discounting—helped keep the margin close to expectations. Management highlighted that the margin performance exceeded the 41.2 % consensus estimate.
Guidance for the full year was raised: net sales growth is now expected to be 1.7 %–2.0 % versus the prior 1.5 %–1.8 % range, and operating margin guidance was lifted to the high end of the previous range. CEO Richard Dickson said the company’s “strategy is working and our brands are gaining momentum,” and CFO Katrina O’Connell noted that gross margin exceeded expectations by over 100 basis points, underscoring the effectiveness of the brand reinvigoration playbook and the company’s focus on executing with excellence as it heads into the holiday season.
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