Gap Inc (NYSE:GPS) shares fell nearly 14% after the retailer reported fourth-quarter results that came in slightly below Wall Street expectations.
The apparel company posted earnings per share of $0.45, missing the $0.46 consensus estimate, while revenue totaled $4.23 billion, slightly below analyst forecasts of $4.24 billion.
For the quarter ended January 31, net sales rose 2% year over year to about $4.2 billion, with comparable sales up 3%, marking the company’s eighth consecutive quarter of positive comparable sales growth. Online sales increased 5% and accounted for 42% of total revenue, while store sales were flat.
Brand performance was mixed. Gap posted the strongest growth with comparable sales up 7% in the quarter, while Old Navy and Banana Republic each reported 3% and 4% comparable sales growth, respectively. Athleta continued to struggle, with comparable sales declining 10% in the quarter.
For the full fiscal year, Gap brand comparable sales rose 6%, Old Navy increased 3%, and Banana Republic gained 3%, while Athleta declined 9%.
Gross margin came in at 38.1%, down 80 basis points from a year earlier. The company said merchandise margins declined primarily due to an estimated tariff impact of about 200 basis points, although higher average selling prices from lower discounting partially offset the pressure.
Operating income for the quarter was $229 million, representing an operating margin of 5.4%, while net income totaled $171 million.
For fiscal 2025, Gap reported net sales of $15.4 billion, up 2% year over year, and comparable sales growth of 3%. Operating income reached $1.1 billion, with an operating margin of 7.3%, exceeding the company’s outlook. Net income for the year was $816 million, or $2.13 per share.
“The execution of our playbook is driving consistent results, as we achieved our second consecutive year of topline growth and eighth consecutive quarter of positive comparable sales,” Gap CEO Richard Dickson said in a statement.
“Financial and operational rigor combined with the strength of our platform drove one of our highest gross margins in the last 25 years and further strengthened our balance sheet.”