Gap beats Street as same-store sales surge in Q3
Gap Inc. is crediting a viral campaign for driving revenue at its namesake brand and contributing to its strongest same-store sales in years.
The specialty apparel retailer reported third quarter net income of $236 million, down roughly 14% from $274 million during the same period last year. Diluted earnings fell to $0.62 from $0.72, but beat Wall Street estimates of $0.59. CNBC reports that Gap CFO Katrina O’Connell attributed declining profits to the impact of tariffs, which the retailer previously warned about in its first-quarter fiscal 2025 earnings release.
[READ MORE: Gap delivers strong Q1, warns tariffs could cost $100 million to $150 million]
Net sales of $3.94 billion were up 3% compared to $3.83 billion in the prior-year period and ahead of Wall Street projections of $3.91 billion. Comparable sales were up 5% year over year, with store sales rising 3% and online sales growing 2%, representing 40% of total net sales.
The rise in same-store sales marks the strongest growth since Gap’s fiscal 2017 holiday quarter — putting it well ahead of Wall Street expectations of 3.1%, according to financial market intelligence and news service StreetAccount.
Below are comp sales by division:
Old Navy
Third quarter net sales of $2.3 billion were up 5% compared to the prior-year period. Comparable sales were up 6%. According to Gap Inc., Old Navy is winning in strategic categories like denim, active, and kids and baby, while executing “culturally relevant” partnerships.
Gap
Third quarter net sales of $951 million were up 6% year over year. Comparable sales were up 7%, achieving positive comparable sales for the eighth consecutive quarter.
However, the company revealed that its release of its viral “Milkshake” campaign, featuring female pop group Katseye, was a strong contributor to the brand’s quarterly sales.
Banana Republic:
Third quarter net sales of $464 million were down 1% from the third quarter of fiscal 2024. Comparable sales were up 4%.
Athleta
Athleta was the only Gap Inc. brand to significantly stumble during the quarter. Third quarter net sales of $257 million were down 11% compared to the previous year. Comparable sales were down 11%. Gap In. says the brand is resetting for the long term, which will take time.
"We are proud to report that Gap Inc.'s third quarter results exceeded our net sales and margin expectations and delivered the seventh consecutive quarter of positive comparable sales," said Gap Inc. president and CEO Richard Dickson. "Our strategy is working and our brands are gaining momentum with our three largest brands - Old Navy, Gap, and Banana Republic - each posting strong comparable sales.
The company’s strong third quarter and quarter-to-date performance puts Gap Inc. in a strong position for the holiday selling season. “It gives us the confidence to increase our full year net sales outlook to the high end of our prior guidance range,” Dickson added.
In commentary to CNBC. Dickson cited price value in the face of macroeconomic pressure on consumers as helping it break through to consumers.
Fiscal 2025 outlook
The below fiscal 2025 outlook includes the estimated effect of tariffs.
Current FY 2025 Outlook | Prior FY 2025 Outlook | FY 2024 Results | |||
| Net sales | 1.7% to 2% growth | 1% to 2% growth | $15.1 billion | ||
| Net interest income | Approximately $20 million | Approximately $15 million | $25 million | ||
Net store closures 1 | Approximately 35 | Approximately 35 | 56 | ||
Gap Inc. ended the quarter with nearly 3,500 store locations in about 35 countries, of which 2,497 were company-operated.
