Gap Q3 Results Raise Full-Year Outlook
Gap Q3 results showed $3.94 billion in net sales driven by Old Navy and Gap, prompting a guidance raise that may shift near-term investor positioning.
KEY TAKEAWAYS
- Third-quarter net sales were $3.94 billion and comparable sales rose 5%, the seventh straight positive quarter.
- Old Navy and Gap led growth; Old Navy sales were $2.3 billion; Gap sales $951 million.
- Company raised fiscal 2025 net-sales growth to 1.7%-2.0% and operating-margin guidance to about 7.2%.
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Gap Inc. (GAP) reported third-quarter fiscal 2025 results on Nov. 20, 2025, showing stronger demand at Old Navy and the Gap brand. The company raised its full-year sales and operating-margin guidance despite tariff headwinds and economic uncertainty.
Third-Quarter Results and Brand Performance
Gap’s third-quarter net sales rose 3.0% year-over-year to $3.94 billion, with comparable sales increasing 5.0%, marking the seventh consecutive positive quarter. Richard Dickson, president and chief executive, said, "We are proud to report that Gap Inc.'s third quarter results exceeded our net sales and margin expectations and delivered the seventh consecutive quarter of positive comparable sales."
Old Navy led the growth with $2.3 billion in sales, up 5.0% year-over-year, and comparable sales rising 6.0%. The Gap brand generated $951 million, up 6.0% with comparable sales increasing 7.0%. Banana Republic declined, with sales and comparable sales down 11.0% to $257 million. Online sales grew 2.0%, accounting for 40.0% of total net sales.
Net income was $236 million, producing diluted earnings per share of $0.62, down from $0.72 a year earlier. Operating income totaled $334 million, yielding an operating margin of 8.5%.
Outlook, Margins, and Capital Allocation
Gap raised its fiscal 2025 net-sales growth outlook to 1.7%–2.0%, up from 1.0%–2.0%, and increased operating-margin guidance to about 7.2% from a prior range of 6.7%–7.0%. Management attributed the revised guidance to momentum across its three largest brands while noting ongoing tariff-related headwinds and economic uncertainty.
Gross margin for the quarter was 42.4%, down 30 basis points year-over-year but above the company’s outlook. Inventory rose 5.0% to $2.5 billion, an increase the company linked to tariffs. Cash, cash equivalents, and short-term investments increased 13.0% to $2.5 billion.
The board declared a dividend of $0.165 per share for both the third and fourth quarters of 2025. Planned capital expenditures for the year range from $500 million to $550 million. Gap expects about 35 net store closures for fiscal 2025, net interest income near $20 million, and an effective tax rate around 28.0%.
Management said the updated outlook assumes continued momentum in its core brands, ongoing tariff headwinds, and stable consumer demand through the holiday season. No new regulatory events or material compliance disclosures were reported in the quarter.
