Higher Q3 sales let Gap raise annual forecast

American fashion group Gap has achieved a 3 % increase in sales to 3.9 billion dollars (3.6 billion euros) in the third quarter of its 2025 financial year. The CEO is therefore raising the full-year forecast.

Margin decreases

Less positively, Gap’s gross margin fell by 30 basis points to 42.4 %. The merchandise margin even fell by 70 basis points, mainly due to a significant tariff impact. Operating profit came in at 334 million dollars (300 million euros), representing a margin of 8.5 %. Net profit amounted to 236 million dollars (210 million euros), while earnings per share were 62 cents.

The Old Navy brand achieved a 5 % sales increase to 2.3 billion dollars (2 billion euros). The Gap brand itself managed to boost its sales by 6 % to 951 million dollars (870 million euros). Banana Republic sales fell by 1 % to 464 million dollars (430 million euros). The worst performer was Athleta, which recorded an 11 % decline to 257 million dollars (240 million euros).

Outlook raised

Gap now expects its sales to grow 1.7 to 2% for the full fiscal year, aiming for the upper end of the previous range. The company is counting on an operating margin of 7.2 %, including a tariff impact of 100 to 110 basis points. The retailer expects to close a net total of 35 stores this year.

CEO Richard Dickson was “proud” to report that “third quarter results exceeded our net sales and margin expectations”. He sees “a seventh consecutive quarter of positive comparable sales” as proof that “our strategy is working and our brands are gaining momentum.” He added that the results “position us well for the holiday selling season and gives us the confidence to increase our full year net sales outlook to the high end of our prior guidance range.”