Gap Q2 sales remain flat, led by three largest brands

US-based retailer Gap Inc. reported flat net sales for the second quarter to August 2, 2025, amounting to 3.7 billion dollars. Comparable sales were up 1 percent year-over-year (YoY), reflecting the sixth consecutive quarter of positive growth.

Store sales saw a 1 percent decrease, while online sales rose 3 percent and accounted for 34 percent of the company’s total net sales. Gap concluded the quarter with around 3,500 store locations throughout over 35 countries.

In a press release, Richard Dickson, president and CEO of Gap, said the company “overdelivered on profit expectations and achieved our topline goals. He continued: “With positive comps for the sixth consecutive quarter, fueled by our three largest brands Old Navy, Gap and Banana Republic, it’s clear our strategy is working.”

Athleta and Banana Republic report decline as sister brands see upticks

Net sales at Old Navy rose 1 percent compared to the year prior to 2.2 billion dollars. The brand’s comparable sales increased 2 percent.

For Gap, net sales amounted to 772 million dollars, reflecting a 1 percent increase. Comparable sales, meanwhile, rose 4 percent, marking the seventh consecutive quarter of positive comp sales.

Contrastingly, Banana Republic reported a net sales decline of 1 percent to 475 million dollars, despite comparable sales increasing 4 percent.

Athleta, meanwhile, was the only brand to report drops in both net and comparable sales. The brand’s net sales declined 11 percent to 300 million dollars, with comparable sales down 9 percent.

According to the company, Athleta continues to focus on “resetting for the long-term and improving its product and marketing”.

Operating income marginally drops

Gap’s operating income for the period came to 292 million dollars, marginally dropping from last year’s 293 million dollars. Its operating margin was 7.8 percent.

Diluted earnings per share rose 6 percent YoY to 0.57 dollars, while its net income for the quarter amounted to 216 million dollars.

Its gross margin decreased 140 basis points versus last year to 41.2 percent, driven by a 150 basis point decrease in its merchandise margin. The company said this was due to lapping the benefit of incremental sales in the second quarter of fiscal 2024 related to the company's credit card partner revenue sharing agreement.

Gap maintains guidance in face of tariff uncertainty

Looking ahead, Gap has largely maintained its outlook for fiscal year 2025 in the face of tariff uncertainty. The company is anticipating flat net sales compared to the year prior, with growth between 1 to 2 percent expected.

Its operating margin is forecast to be between 6.7 and 7 percent, including an estimated 100 to 110 basis points of net tariff impact. This would reflect a decline on 2024’s 7.4 percent margin.