During its fiscal first quarter, Gap reported that Old Navy's comparable sales grew only 1%, falling short of the 3% growth analysts had anticipated. Consequently, Gap revised its overall sales guidance down to a growth range of 1% to 2%, from a previous estimate of 2% to 3%.
Despite this setback, the company raised its adjusted earnings per share forecast to between $2.30 and $2.40, up from $2.20 to $2.35, driven by favorable tax rates and interest income. Gap's stock fell more than 10% in after-hours trading following the announcement.
CEO Richard Dickson attributed the weak sales to a lack of appealing spring and summer products rather than broader consumer issues, noting that sales in categories like dresses and swimming shorts were particularly weak, while activewear and denim performed well.
In contrast, Gap's namesake brand saw a strong 10% increase in comparable sales, exceeding expectations, while Banana Republic's growth was modest at 2%. Athleta continued to struggle with an 11% decline in comparable sales.
The company is also anticipating an $80 million benefit from reduced tariff rates, although this has not been factored into the current guidance as it is being reserved for potential future needs