Gap Shares Plunge 14% as Old Navy Weakness Forces Sales Guidance Cut
Gap Inc. shares dropped more than 14% in extended trading on Thursday after the retailer’s largest brand, Old Navy, posted weaker-than-expected sales in the fiscal first quarter, prompting the company to lower its full-year sales guidance.
Old Navy Underperforms in Q1
Old Navy’s comparable sales grew 1% during the fiscal first quarter, falling short of the 3% growth analysts had anticipated, according to StreetAccount. The brand, which accounts for nearly 60% of Gap’s overall revenue, saw sluggish performance in key seasonal categories. Chief Executive Officer Richard Dickson told CNBC that the issue was not macroeconomic but rather a spring and summer assortment that failed to resonate with shoppers. “It’s not a consumer issue,” Dickson said. “We’re winning with all income cohorts across low, middle, and high. When you have the right product at the right price value equation, customers are there, and our seasonal categories just got off to a weaker start.”
Sales of Old Navy’s dresses and swimming shorts were particularly weak, while activewear, denim, and kids’ categories showed strength. Dickson said the brand is working to improve sales through better price points and marketing, noting that trends have started to improve. However, as the slowdown has persisted into the current quarter, the company is taking a “moderated view” of the year, he added.
Gap Cuts Sales Outlook, Raises Profit Forecast
Gap now expects companywide sales to grow between 1% and 2%, down from the prior range of 2% to 3%. The revised guidance reflects pressure from Old Navy’s underperformance. Despite the sales cut, the company raised its adjusted earnings per share forecast to between $2.30 and $2.40, compared with the previous range of $2.20 to $2.35. Chief Financial Officer Katrina O’Connell attributed the higher earnings forecast to tax rate favorability and interest income, including an expected $80 million benefit.
For the fiscal first quarter ended May 2, Gap reported revenue of $3.50 billion, up slightly from $3.46 billion a year earlier but below the $3.52 billion analysts expected. Net income surged to $339 million, or 90 cents per share, from $193 million, or 51 cents per share, a year prior. Excluding one-time items related to a hefty legal settlement, adjusted earnings per share came in at 38 cents, beating the 37 cents estimate from analysts surveyed by LSEG.
Market Context
Gap shares fell more than 14% in after-hours trading following the results. Current market data as of May 28, 2026:
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