Gap Inc. Shares Plunge on Tariff Woes and Mixed Q2 Results

SAN FRANCISCO, Aug. 28, 2025 - Gap Inc. (NYSE: GAP) shares tumbled nearly 10 percent in after-hours trading after the apparel retailer warned that escalating import tariffs would weigh on its operating margins and delivered a mixed second-quarter performance.

Tariff Impact Dents Margin Outlook Gap now expects its annual operating margin to shrink to around 6.7 percent-7 percent, reflecting an estimated 100-110 basis-point drag from new U.S. tariffs on imported goods. The company had previously anticipated offsetting more than half of its $250 million-$300 million tariff bill, but rising duties, particularly on products sourced from China, have forced a reassessment of its cost outlook.

Q2 Financials: Flat Sales, EPS Beat For the quarter ended Aug. 2, Gap reported net sales of $3.725 billion, essentially flat year-over-year, and comparable-store sales up 1 percent, its sixth straight quarter of positive comps. Diluted earnings per share rose 6 percent to $0.57, topping analyst expectations of $0.55 per share.

Brand Performance and Inventory Pressures While Gap’s flagship, Old Navy, and Banana Republic brands each delivered modest gains, Athleta’s comparable-store sales fell 9 percent, exacerbating inventory management challenges. CEO Richard Dickson described Athleta’s results as part of a “year of reset,” underscoring plans for leadership changes and renewed focus on core customers.

Market Reaction and Guidance Investors reacted sharply to Gap’s updated margin guidance and mixed sales trends, sending the stock down 9.8 percent to $20.30 in extended trading. Despite the setback, Gap reaffirmed its full-year net-sales growth outlook of 1 percent-2 percent, though it acknowledged continued uncertainty around tariff enforcement and consumer spending.

• Reporting by Reuters; additional reporting by PR Newswire.