Gap Forecasts Lower Annual Profit Amid Tariff Pressures
Gap expects annual profit below estimates as import tariffs impact margins. The retailer also notes that shoppers are becoming more selective with spending.
The Gap, Inc. has issued an annual adjusted profit forecast that falls largely below Wall Street expectations, as the apparel manufacturer faces significant pressure from import tariffs and a cautious consumer environment in the United States. The parent company of Old Navy expects a 200-basis-point impact on its current-quarter gross margins due to these trade duties.
According to its 2024 annual report, Gap sources approximately 46% of its products from Southeast Asian countries such as Vietnam and Indonesia. These regions were hit by tariffs last year, and recent legal developments regarding trade policy have added to the industry's uncertainty.
The retailer projects annual adjusted earnings to range between $2.20 and $2.35 per share, compared to the analyst average estimate of $2.32. This trend of tariff-related margin pressure has also been noted by competitors, including American Eagle Outfitters, Inc., Abercrombie & Fitch Co., and Steven Madden, Ltd..
Holiday-quarter same-store sales for the company rose by 3%, missing the 3.08% growth target as consumers, particularly those in lower-income brackets, prioritized discounts and deferred non-essential spending. To maintain market share, Gap is increasing its capital expenditure to roughly $650 million for the year, up from $470 million in 2025, with a focus on advertising. The company expects fiscal 2026 net sales to grow between 2% and 3%, which is consistent with market estimates.
