Retailer Gap Inc. posts stronger-than-expected first-quarter earnings for 2025, prompting a stock rally and an upgraded guidance for the remainder of the year.
posted a better-than-anticipated first-quarter performance for the fiscal year 2025, outpacing analyst expectations on both earnings and revenue. The apparel retailer also raised its full-year guidance, fueling optimism about its ongoing turnaround and sending its shares surging in after-hours trading.
Gap Inc. Beats Q1 2025 Earnings Expectations
Gap Inc., the parent company of brands such as Old Navy, Banana Republic, Athleta, and Gap, reported earnings for the first quarter of 2025 that exceeded Wall Street estimates. The retailer posted adjusted earnings per share of $0.31, well above the consensus forecast of $0.14, according to Refinitiv data.
Net sales for the quarter reached $3.39 billion, up from $3.28 billion a year earlier and surpassing analyst projections of $3.29 billion. The company credited improved inventory management and stronger-than-expected consumer demand—particularly at its Old Navy and Athleta brands—for the strong results.
Double-Digit Profit Growth and Brand Momentum
Gap Inc. reported net income of $209 million for the quarter, or $0.31 per share, compared with $109 million, or $0.18 per share, during the same period last year—a near-doubling of year-over-year profitability. Operating margin expanded to 7.1% from 5.3% a year ago, reflecting stronger full-price selling and a reduction in promotional activity.
Brand performance was led by Old Navy, which posted a comparable sales increase of 4%. Athleta, Gap’s activewear brand, saw comps climb by 6%, while Banana Republic posted a 1% uptick. Sales at the namesake Gap brand were flat year-over-year, but management pointed to ongoing efforts to reposition the brand for future growth.
Inventory And Cost Control Drive Improved Margins
A key highlight of the quarter was Gap’s improved inventory position, which declined 8% year over year. The reduction allowed the company to cut back on markdowns and boost full-price sales, directly benefiting the bottom line.
“Inventory discipline was a central focus and we executed well,” said Katrina O’Connell, Chief Financial Officer. “Our leaner inventory position enables us to respond more nimbly to market shifts and protect margins.”
Operating expenses as a percentage of sales also improved, coming in at 32.5% for the quarter, down from 34.2% a year earlier.
Increased Guidance and Market Reaction
Buoyed by the strong first-quarter performance, Gap Inc. raised its full-year earnings outlook. The company now expects adjusted earnings per share in the range of $1.80 to $2.05, up from prior guidance of $1.40 to $1.70.
The announcement drove a surge in Gap shares, which jumped as much as 12% in after-hours trading Thursday following the earnings release.
“Gap’s ability to capitalize on demand while maintaining cost discipline is a significant differentiator in today’s retail environment,” said Neil Saunders, managing director at GlobalData Retail, in a research note to clients.
Challenges and Industry Perspective
Despite the upbeat results, the retailer cautioned about ongoing macroeconomic uncertainty and changing consumer preferences, both of which could impact spending. Gap Inc. is continuing to invest in digital capabilities, store renovations, and supply chain improvements as part of its strategic turnaround plan.
Industry analysts also noted Gap’s progress at a time when many apparel retailers are struggling to drive growth amid cautious consumer spending. The company’s focus on compelling product assortments and tighter inventory control appears to be paying off.
“While the apparel sector remains competitive, Gap’s results suggest its brands are resonating again, thanks to a mix of value and differentiation,” said Jane Hali, retail analyst at Jane Hali & Associates.
Looking Ahead: Turnaround Story Gathers Pace
Gap Inc.’s results for the first quarter of 2025 offer further evidence that its strategic overhaul—which includes brand repositioning, inventory management, and cost control—is starting to yield sustained progress. Executives said they remain focused on innovation, digital growth, and enhancing the customer experience as the retailer heads into the critical summer and back-to-school shopping seasons.
Sources Used
- Gap earnings Q1 2025 (CNBC)
- Refinitiv consensus data (referenced by CNBC)
- Quotes and statements from Gap Inc. Q1 2025 earnings call (as reported by CNBC)
- Analyst perspectives from GlobalData Retail and Jane Hali & Associates (as cited in CNBC article)
