The US clothing group Gap Inc. has updated its annual forecast after presenting its financial results for the first quarter ending May 2, 2026. The group reported a one percent increase in net sales to $3.50 billion (approximately €3 billion). Comparable sales rose two percent, marking the ninth consecutive quarter of positive growth.
Outstanding quarter for the Gap brand
Performance within the portfolio varied over the 13-week reporting period. The core Gap brand of San Francisco-based Gap Inc. achieved a 10 percent increase in both net sales and comparable sales, reaching $796 million. The company emphasized that this was one of the brand’s strongest performances in more than two decades. Growth was driven by culturally relevant storytelling in key categories such as denim, fleece and children’s fashion.
Old Navy, the top-selling brand in the portfolio, reported net sales of $2.00 billion. This corresponds to an increase of one percent compared to the previous year; Comparable sales also rose by one percent. However, growth in denim, activewear and children’s wear was offset by weakness in women’s clothing. During an investor call, Richard Dickson, president and chief executive officer (CEO) of Gap Inc., discussed the challenges in the category. He explained that the group had not struck the right balance between fashion, price and performance in seasonal lines. The customer response to swimwear and shorts was also weaker.
Banana Republic’s net sales rose 1 percent to $431 million, while comparable sales rose 2 percent. Activewear brand Athleta continued its multi-quarter decline. Net sales fell 12 percent to $270 million, while comparable sales fell 11 percent. The brand is currently focusing on reorienting its product range for the second half of the year.
Operating profit and margin details
The company reported first-quarter operating income of $445 million and an operating margin of 12.7 percent. Adjusted operating income was $182 million and the adjusted operating margin was 5.2 percent. The gross margin was 40.5 percent in the quarter, 130 basis points below the previous year’s figure.
The group’s store sales increased by three percent, while e-commerce sales fell by two percent and accounted for 38 percent of total net sales. Gap Inc. ended the period with 3,477 stores in around 35 countries.
Net income for the quarter was $339 million, or $0.90 per diluted share. Adjusted net income was $145 million, resulting in adjusted diluted earnings per share of $0.38.
Updated annual forecast
For the 2026 financial year, the company expects net sales to increase by one to two percent compared to the previous year. The previous forecast was for sales to remain unchanged or slightly increase. The company also raised its adjusted diluted earnings per share guidance to a range of $2.30 to $2.40. A range of $2.20 to $2.35 was previously forecast.
The full-year guidance includes a 50 basis point positive impact on gross margin and operating margin as a result of updated Section 122 tariff assumptions. This represents a net tariff relief of approximately $80 million.
For the second quarter of fiscal 2026, the retailer expects net sales to be between flat and negative one percent compared to the same period last year, which brought in $3.70 billion. The gross margin is expected to remain unchanged or be up to 50 basis points below the previous year’s figure of 41.2 percent.
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