The company reported net sales of $3.5 billion for the first quarter (Q1) ended May 2, 2026, up 1 per cent year on year (YoY), while comparable sales rose 2 per cent, marking the ninth consecutive quarter of positive comparable sales growth. Store sales increased 3 per cent, though online sales declined 2 per cent and accounted for 38 per cent of total sales.
Gap Inc has reported a steady start to FY26, with Q1 net sales rising 1 per cent to $3.5 billion and comparable sales up 2 per cent, marking the ninth straight quarter of growth.
Gap brand led performance with double-digit gains.
The retailer raised its FY26 adjusted EPS outlook to $2.3-$2.4, supported by temporary tariff relief, while remaining cautious over fuel costs and market uncertainties.
“In the first quarter, Gap Inc delivered continued progress against our strategic priorities, including further market share gains and achieving our ninth consecutive quarter of positive comparable sales,” said president and chief executive officer Richard Dickson.
“Gap brand delivered a standout quarter with a double-digit comp, marking one of the brand’s strongest performances in over two decades,” Dickson added.
The gross margin stood at 40.5 per cent, down 130 basis points from the prior-year quarter, though ahead of company expectations. Merchandise margin declined 100 basis points, including an estimated 200 basis-point net tariff impact. Gap said underlying merchandise margin expansion was supported by stronger inventory management and higher average unit retail prices across all brands, Gap said in a press release.
Operating income rose sharply to $445 million, with operating margin at 12.7 per cent. Adjusted operating income excluding non-recurring items was $182 million, while adjusted operating margin was 5.2 per cent. Net income reached $339 million, translating into diluted EPS of $0.90. Adjusted diluted EPS came in at $0.38.
Gap ended the quarter with cash, cash equivalents and short-term investments of $2.6 billion, up 15 per cent from a year earlier.
Gap brand shines with double-digit growth
Among its brands, Gap delivered the strongest performance, with sales rising 10 per cent to $796 million and comparable sales also increasing 10 per cent, driven by demand for denim, fleece and kidswear categories. Old Navy posted 1 per cent sales growth to $2.0 billion, supported by denim, activewear and baby products.
Banana Republic recorded 1 per cent sales growth to $431 million, while comparable sales increased 2 per cent, marking its fourth straight quarter of positive comparable sales growth. Athleta remained under pressure, with sales declining 12 per cent to $270 million and comparable sales falling 11 per cent.
Gap remains cautious despite improved outlook
Looking ahead, Gap raised its adjusted diluted EPS outlook for fiscal 2026 to approximately $2.3-2.4 from the earlier guidance of $2.20-2.35. The company expects net sales to grow 1-2 per cent YoY and adjusted operating margin to remain around 7.3-7.5 per cent.
The company said its revised outlook incorporates benefits from temporary tariff relief under Section 122, which is expected to contribute around $80 million to gross profit and operating income during fiscal 2026. However, the retailer also cautioned that it remains prepared for uncertainties related to fuel costs, promotional intensity and the broader operating environment.
Fibre2Fashion News Desk (SG)
