In Q3, FY25, American clothing and accessories retailer Gap Inc projects a 1.5 per cent -2.5 per cent rise in net sales while gross margins are expected to increase by 150-170 bps including a 200 bps tariff impact.

In Q2, FY25, Gap reported net sales of $3.7 billion, which was flat compared to the previous fiscal year. However, the brand’s comparable sales increased by 1 per cent, marking the sixth consecutive quarter of positive comps. The company’s diluted earnings per share (EPS) increased by 6 per cent Y-o-Y, which was supported by disciplined cost management despite margin pressures.

Online sales grew by 3 per cent and accounted for 34 per cent of total sales, while store sales declined by 1 per cent. The company closed the quarter with about 3,500 stores, with 2,486 being company-operated.

The company’s gross margin shrank by 140 basis points to 41.2 per cent, largely due to a credit card revenue-sharing benefit from the previous year. Operating income was $292 million, reflecting a margin of 7.8 per cent. Net income totaled $216 million with an effective tax rate of 27 per cent.

At the brand level, Old Navy recorded a 1 per cent rise in sales to $2.2 billion with comparable sales increasing by 2 per cent. Sales of the Gap brand also increased by 1 per cent to $772 million with comparable sales rising 4 per cent, marking the seventh consecutive quarter of positive comps.

Banana Republic recorded a 1 per cent decline in sales to $475 million, but its comparable sales increased 4 per cent, reflecting progress in its repositioning strategy. However, Athleta continued to struggle, with sales declining by 11 per cent to $300 million.