Gap Inc. has raised its full-year profit outlook after reporting better-than-expected second-quarter results, driven largely by strong performance at its Old Navy brand. The company’s fiscal Q2 results were released earlier than planned after an administrative error led to their premature posting on the company’s website.
For the quarter ending August 3, Gap reported earnings of $206 million, or 54 cents per share, nearly double the $117 million, or 32 cents per share, from the same period last year. Revenue rose to $3.72 billion, a 5% increase from $3.55 billion in the previous year, surpassing Wall Street’s expectations of $3.63 billion.
Gap’s Old Navy brand was a standout, with sales rising 8% to $2.1 billion, and comparable sales up 5%, exceeding analyst forecasts. CEO Richard Dickson credited the brand’s success to improved product assortments and a heightened focus on fashion-forward value offerings. As inflation and high interest rates push consumers toward more affordable options, Old Navy’s strategic emphasis on value has resonated with a broad range of customers.
Dickson, who took over as CEO earlier this year, has been focused on revitalizing Gap’s four main brands—Old Navy, Banana Republic, Athleta, and the namesake Gap banner. Under his leadership, the company has seen improvements not only in sales but also in profitability and overall financial health. Gap ended the quarter with $2.1 billion in cash, cash equivalents, and short-term investments, a 59% increase from the previous year.
While Old Navy has shown strong growth, Gap’s other brands had mixed results. The Gap banner saw a modest 1% increase in revenue to $766 million, with comparable sales up 3%. However, the company’s athleisure brand, Athleta, reported a 1% decline in sales to $388 million, with comparable sales down 4%. Banana Republic’s revenue remained flat, as the brand struggled to find the right balance between pricing and product assortment.
Dickson acknowledged the challenges but expressed optimism about the company’s ongoing transformation. He emphasized the importance of financial and operational discipline in driving the company’s turnaround, alongside a renewed focus on brand identity and cultural relevance.
As Gap continues to refine its strategies, particularly in pricing and product offerings, the company is poised for further growth. The revised profit outlook reflects confidence in the steps being taken to reinvigorate the brands and capture greater market share. Despite some ongoing challenges, Gap’s solid performance in Q2 underlines the progress being made under Dickson’s leadership.
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