Gap reports second year of topline growth amid strategic transformation

NEW YORK — Gap Inc. has reported financial results for the fourth quarter and fiscal year ended January 31, 2026, marking what the company describes as a transition from ‘fixing fundamentals’ to a ‘building momentum’ phase. The US-based specialty apparel group achieved net sales of 15.40 billion dollars for the full year, representing a 2 percent increase compared to the previous year.

Despite navigating significant macroeconomic headwinds, including a substantial net tariff impact, the company maintained an operating margin of 7.30 percent for the fiscal year. President and chief executive officer, Richard Dickson, attributed the performance to "financial and operational rigor" and the continued strength of the company’s brand platform.

Fiscal 2025 financial performance

The group’s fourth quarter net sales reached 4.20 billion dollars, up 2 percent year-over-year, supported by a 5 percent increase in online sales. E-commerce remains a critical pillar for the company, representing 42 percent of total net sales in the final quarter. Comparable sales across the portfolio rose by 3 percent.

For the full fiscal year, the company reported net income of 816 million dollars, gross margin of 40.80 percent, a decline of 50 basis points primarily due to an estimated net tariff impact of 120 basis points and operating income of 1.10 billion dollars.

The company ended the year with 3.00 billion dollars in cash, cash equivalents, and short-term investments. Underscoring a commitment to shareholder value, the board of directors approved a new one billion dollar share repurchase authorization and increased the first quarter dividend for fiscal 2026 by 6 percent to 0.175 dollars per share.

Brand highlights and category expansion

Performance varied across the group’s four primary banners. Gap, the namesake brand, demonstrated significant momentum with full year net sales increasing 5 percent to 3.50 billion dollars with comparable sales up 6 percent. The brand notably improved its ranking in the denim category from number 10 to number six within two years.

Old Navy remained the group’s largest revenue driver, posting full year net sales of 8.70 billion dollars, up 3 percent. Banana Republic saw a 3 percent increase in comparable sales despite a 1 percent dip in net sales to 1.90 billion dollars.

Conversely, Athleta continued to face challenges, with full year net sales dropping 10 percent to 1.20 billion dollars as the group focuses on a long-term brand rebuild.

To drive future revenue, Dickson highlighted "growth accelerators" in lifestyle categories:

Beauty: A strategic expansion launched with a 150-store pilot at Old Navy. The company views beauty as a resilient category that typically represents 5 percent to 20 percent of sales for apparel peers.

Accessories: Identified as an underdeveloped segment with high scaling potential.

Fragrance: Gap plans to relaunch its fragrance line later this year.

Strategic shift toward Fashiontainment and technology

Gap Inc. is increasingly leaning into ‘Fashiontainment’— the intersection of fashion and entertainment, to drive brand relevance. Under the leadership of chief entertainment officer, Pam Kaufman, the group is leveraging music, film, and art to engage consumers. Recent initiatives include a music video collaboration with Katseye and fashion activations during the NBA All-Star Weekend.

"These campaigns are designed to drive interest," Dickson stated, noting that increased cultural relevance translates directly into higher traffic across omnichannel touchpoints. The company also plans to accelerate the rollout of new store formats for the Gap brand following successful tests in locations like the Flatiron District in New York and Soho.

Outlook for fiscal 2026

For the upcoming fiscal year, Gap Inc. expects net sales to increase between 2 percent and 3 percent. While the first quarter is expected to face a 200 basis point headwind from tariffs, chief financial officer, Katrina O’Connell, noted that sourcing strategies are expected to mitigate these impacts, potentially turning them into a tailwind by the second half of the year.

The company has set an adjusted diluted earnings per share guidance of 2.20 dollars to 2.35 dollars for fiscal 2026. Capital expenditures are projected at approximately 650 million dollars, reflecting increased investment in technology and store experience enhancements.