Gap Inc (NYSE:GPS)’s emerging beauty and accessories lines, alongside tighter cost discipline and a more selective approach to store expansion, could provide meaningful long-term growth drivers for the retailer, Jefferies said on Wednesday after meeting with company executives.
Jefferies, which rates the stock “Buy” with a $30 price target, said its analysts met with Chief Financial Officer Katrina O’Connell and Head of Investor Relations Whitney Notaro to discuss initiatives across pricing, promotions, store fleet strategy and capital allocation.
Management “reiterated confidence in the health of core brands, highlighted Old Navy’s leadership, and emphasized a balanced approach to growth and shareholder returns,” the brokerage wrote.
A major focus is Gap’s push into beauty and accessories. Beauty products are currently being tested at Old Navy through “fun zones” and shop-in-shop pilots featuring third-party brands and owned items. Jefferies said the testing phase would run through mid-2026, with a broader rollout expected in late 2026 and 2027.
Accessories remain in an early build-out phase, led by new hires and starting with handbags before expanding across all four brands. Jefferies described the category as an “underappreciated long-term driver” for both sales and margins.
Gap’s pricing strategy also remains disciplined, with modest increases in the third quarter helping lift regular-price sell-through, average unit retail and overall unit growth. Recent collaborations with designers Sandy Liang and Anna Sui are helping reinforce brand strength, the analysts said, while management plans to keep fourth-quarter promotions “flat” year-over-year despite the holiday season.
Jefferies said the company’s tight control of selling, general and administrative expenses continues to unlock marketing creativity despite a flattish budget. Analysts cited campaigns such as the “Katseye” ad as examples of impactful marketing that did not require additional spending.
On stores, the analysts said Gap’s fleet strategy may be shifting from closures — particularly at Banana Republic — toward selective openings and more experiential concepts. Management pointed to the Flatiron store in New York as a newer model that could inspire additional concepts, creating a scenario in which the company “becomes a net opener over time.”
Jefferies also noted Gap’s balanced capital allocation, with about $525 million in planned capital expenditures this year, roughly $225 million in dividends, and $250 million remaining under its share buyback authorization. With about $2.5 billion in cash, the firm said Gap retains considerable flexibility.
“We came away incrementally encouraged on Gap’s ability to sustain share gains and drive better top- and bottom-line growth over time,” Jefferies wrote, highlighting strong core categories such as denim and active, along with the longer-term potential of beauty and accessories.
“These initiatives, combined with disciplined execution and capital returns, position Gap favorably for durable growth in the near and long term,” the analysts added.