The retail group, which operates the Gap, Old Navy, Banana Republic and Athleta brands, now expects net sales to rise by 1% to 2% year-on-year, down from the previous projection of an increase of 2% to 3%.
For the first quarter ended 2 May 2026, Gap reported net sales of $3.5bn, marking a 1% rise from the same period a year ago. Comparable sales, which track performance at stores open for at least a year and online, were up 2%.
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The company, which operates nearly 3,500 stores across 35 countries, saw its store sales increase by 3% against last year. Online sales declined by 2% and online channels accounted for 38% of overall net sales during the quarter.
During Q1, the Gap brand saw a 10% increase in first-quarter net sales to $796m, with comparable sales also up 10%. The company attributed the result to what it described as “culturally relevant storytelling” that helped strengthen positions in denim, fleece, and kids and baby categories.
Sales in Banana Republic and Old Navy, its largest label, were both up just 1% versus the prior year, while the group’s Athleta brand reported a 12% decrease in net sales to $270m, with comparable sales down 11%.
Gap president and chief executive officer Richard Dickson said: “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.
“Gap brand delivered a standout quarter with a double-digit comp, marking one of the brand’s strongest performances in over two decades. Performance across our other brands was varied, reflecting both the different stages of their transformation and some brand-specific dynamics.”
Key metrics from Gap’s first quarter performance
Gap’s gross margin came in at 40.5% in Q1 FY26, down 130 basis points year-on-year, but above the company’s previous outlook.
The company stated that merchandise margin fell by 100 basis points, incorporating an estimated 200 basis point negative impact from tariffs.
During the quarter, the retailer’s operating expenses totalled $972m, making up 27.8% of net sales.
Operating income for the quarter was $445m, with a margin of 12.7%. When non-recurring items are excluded, adjusted operating income was $182m and adjusted operating margin was 5.2%.
Gap reported a net income of $339m for the period, translating to diluted earnings per share (EPS) of $0.90.
After adjusting for non-recurring items, net income was $145m and adjusted diluted EPS were $0.38.
Full year 2026 outlook
For the full year, Gap now anticipates flat to slightly improved gross margin, and expects adjusted operating expenses as a percentage of net sales to remain broadly steady compared to the previous year’s 33.5%.
Projected adjusted operating margin is unchanged at about 7.3% to 7.5%.
The company also expects net interest income of around $25m, an effective tax rate of approximately 25%, and adjusted diluted earnings per share in the range of $2.30 to $2.40.
Gap stated that its outlook reflects a “balanced approach,” incorporating updated tariff assumptions while also accounting for potential uncertainties in the operating environment for the remainder of the year.
