Gap Shares Fall 14% as Retailer Cuts Sales Forecast Despite Strong Earnings

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5.29.2026

Quick Facts

Gap stock dropped 14% in after-hours trading after cutting fiscal 2026 sales growth forecast to 1-2% from 2-3%
Old Navy comparable sales grew just 1% versus 3% analyst expectations, pressuring overall results
Company raised earnings guidance to $2.30-$2.40 per share from $2.20-$2.35 despite sales concerns

Gap shares plummeted 14% in after-hours trading May 28 after the retailer lowered its fiscal 2026 sales growth outlook despite beating first-quarter earnings expectations.

The company now expects sales to grow 1% to 2%, down from its previous forecast of 2% to 3%. Gap also projected second-quarter sales to be flat to down 1%, below analyst estimates of 2.1% growth.

First-quarter revenue reached $3.50 billion, missing analyst expectations of $3.52 billion. Net income jumped to $339 million, or 90 cents per share, from $193 million, or 51 cents per share, a year earlier.

Old Navy drove the disappointing outlook. The brand, which accounts for nearly 60% of Gap’s revenue, posted 1% comparable sales growth against analyst expectations of 3%. Net sales reached $2 billion, up 1% year over year.

“Seasonal categories have gotten off to a weaker start, in particular dresses,” CEO Richard Dickson said during the earnings call. “Bluntly, we have not had the right fashion and value equation for that category.”

Gap’s namesake brand delivered strong results with 10% comparable sales growth, marking its 10th consecutive quarter of positive growth. Sales reached $796 million, up 10% from the prior year.

Athleta posted the weakest performance with net sales falling 12% and comparable sales declining 11%. Dickson called the results “disappointing” and said 2026 is a rebuild year for the athletic brand.

Banana Republic comparable sales grew 2%, below the 4% analyst expectation, with overall sales rising 1% to $431 million.

Despite the sales pressure, Gap raised its earnings guidance. The company now expects adjusted earnings per share between $2.30 and $2.40, up from the previous range of $2.20 to $2.35. Gap expects $80 million in tariff relief to boost gross profit and operating income.

JPMorgan downgraded Gap from Overweight to Neutral and cut its price target to $27 from $35 following the results. The bank cited concerns about the lowered sales outlook signaling weaker demand assumptions.

Dickson emphasized that consumer spending patterns remain healthy across income levels when Gap offers the right product-price equation. The retailer continues working to win back shoppers amid persistent inflation and economic uncertainty.