The company reported net sales of $3.7bn for the period, representing a 2% drop compared to the same quarter last year. Comparable sales also slipped 1%.
During the quarter, total store sales decreased 3%, while online sales, comprising 35% of total net sales edged down 1%.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Among brands, Old Navy, its largest by revenue, posted a 4% decline in comparable sales with net sales down to $2.1bn.
The company cited “expected pressure in the women’s seasonal assortment” and an “unanticipated slowdown in traffic” as factors for the brand’s underperformance.
The Gap brand achieved a 10% rise in comparable sales and a 9% increase in net sales to $844m, driven by strong demand in categories such as denim, fleece, and childrenswear.
Banana Republic’s net sales inched up 1% to $478m, and comparable sales rose 3%, with performance evenly spread across men’s and women’s ranges.
Meanwhile, the performance athleticwear brand Athleta continued to struggle, with net sales and comparable sales each falling 12% to $264m, as the division focuses on rebuilding profitability.
Despite weaker sales performance, Gap’s gross margin climbed significantly to 52.8%, bolstered by a $417m benefit from a recovery of tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA).
Excluding this one-off gain, the adjusted gross margin was 41.4%, a marginal improvement of 20 basis points over last year.
Gap’s operating income for the quarter was $676m for the quarter, with an operating margin of 18.5%. On an adjusted basis, stripping out the tariff recovery, operating income was $259m and margin was 7.1%.
Net income for the quarter totalled $501m, with adjusted net income of $190m when excluding the tariff-related effects and related interest income.
Gap President and chief executive officer, Richard Dickson said: “While top-line results in the second quarter were modestly below expectations, continued operational and financial rigor contributed to gross margin strength resulting in the Company exceeding profit expectations.”
In response to the changes to US tariffs announced in July, Gap has updated its full year outlook.
The company now anticipates full-year net sales to rise by 1% to 1.5%, with Old Navy’s comparable sales projected to be flat or decrease up to 1%, revised from the earlier estimate of flat to up 1% following the brand’s second-quarter results.
Expectations for comparable sales growth at the Gap brand have been raised to a range of high single digits to low double digits, up from the previous outlook of high single-digit growth, while forecasts for the other brands remain unchanged.
The company expects full-year diluted earnings per share to be approximately $3.77 to $3.87 on a reported basis.
In a separate announcement, Gap stated that Michael Francis will become president and chief executive officer of Old Navy from 2 November 2026.
Francis initially joined Gap in March 2026 as chief customer officer for Old Navy and head of marketing shared services. He will take over from Haio Barbeito, who will move into an advisory role.
Earlier this month, Gap announced a new partnership with Dubai-based Chalhoub Group to expand the Gap, Banana Republic, and Athleta brands across the Gulf Cooperation Council (GCC) region.
