The Gap, Inc.

Net sales were $3.5 billion, up 1% year over year, and comparable sales increased 2%. Gap net sales were $796 million, up 10%, with comps up 10%; Old Navy net sales were $2 billion, up 1%, with comps up 1%; Banana Republic net sales were $431 million, up 1%, with comps up 2%; and Athleta net sales were $270 million, down 12%, with comps down 11%. Gross margin was 40.5%, down 130 basis points year over year, and adjusted EPS was $0.38 versus $0.51 last year; reported EPS was $0.90. For fiscal 2026, the company now expects net sales growth of 1% to 2%, adjusted EPS of $2.30 to $2.40, adjusted operating margin of 7.3% to 7.5%, and full-year gross margin to be flat to up slightly. For Q2, management expects net sales to be flat to down 1% year over year, gross margin to be about flat to down 50 basis points versus last year, and SG&A to deleverage about 110 to 120 basis points.

Richard Dickson framed the quarter as continued progress in the transformation, with 3 of 4 brands growing and the Gap brand broadening its momentum across categories and cultural moments. He said the company is investing in future growth areas like beauty, accessories, technology and Fashiontainment, while also taking action where execution is weaker, especially at Old Navy and Athleta. His tone was constructive but measured: he repeatedly said the year is still early, that the teams are moving quickly, and that the company is aiming to outperform the current outlook.

Katrina O’Connell emphasized that the company exceeded gross margin expectations, with Q1 gross margin at 40.5% and adjusted SG&A at 35.3% of sales, while also funding investment initiatives and returning more cash to shareholders. She said adjusted EPS excludes a $313 million legal settlement net gain and a concurrent $50 million charitable donation, and highlighted $135 million of Q1 capex with about $650 million expected for fiscal 2026. She also noted $2.6 billion of cash and investments on the balance sheet, $213 million of operating cash flow, $78 million of free cash flow, about $400 million of repurchases year to date, and a 6% dividend increase to $0.175 per share.

Analysts pressed for detail on Old Navy’s weaker seasonal assortment, asking whether the issue was macro-driven or internal, how quickly it can be fixed, and whether the business is within guidance. Management said the problem was not consumer weakness but an assortment and value-equation miss, especially in dresses and some other seasonal categories, and said trends improved after pricing and messaging changes took hold in mid-May. Questions also focused on tariffs and buybacks; O’Connell said the company expects about $80 million of net tariff relief versus prior neutral assumptions, but is reserving half as a buffer and half for pricing flexibility, while Q2 weighted average shares are expected around 371 million.