The Investor
28 Aug 2026, 11:20
Gap Surges 17% as Profit Beat and Higher EPS Outlook Offset Weak Sales
Gap (NYSE: GAP) shares jumped 17% in premarket trading after the apparel retailer exceeded profit expectations and raised its fiscal 2026 earnings outlook despite weaker second-quarter sales.
Net sales declined 2% to $3.7 billion and comparable sales fell 1%, but adjusted operating margin reached 7.1%, exceeding the company’s expectations. Adjusted EPS was $0.52. Management said disciplined execution and stronger gross margins helped profitability outperform despite softer revenue.
The Gap brand was a major bright spot, with comparable sales surging 10% and revenue rising 9%. However, Old Navy comparable sales fell 4%, while Athleta remained particularly weak with a 12% decline.
Investors appear particularly encouraged by the improved profit outlook. Gap raised adjusted FY26 EPS guidance to approximately $2.35–$2.45 from $2.30–$2.40 and increased its adjusted operating-margin forecast to 7.4%–7.6%. This came even as full-year sales growth guidance was trimmed to 1%–1.5%.
The 17% rally suggests investors are rewarding Gap’s improving profitability, strong momentum at its namesake brand and higher earnings expectations, while looking past continued weakness at Old Navy and Athleta.
Gap (NYSE: GAP) shares jumped 17% in premarket trading after the apparel retailer exceeded profit expectations and raised its fiscal 2026 earnings outlook despite weaker second-quarter sales.
Net sales declined 2% to $3.7 billion and comparable sales fell 1%, but adjusted operating margin reached 7.1%, exceeding the company’s expectations. Adjusted EPS was $0.52. Management said disciplined execution and stronger gross margins helped profitability outperform despite softer revenue.
The Gap brand was a major bright spot, with comparable sales surging 10% and revenue rising 9%. However, Old Navy comparable sales fell 4%, while Athleta remained particularly weak with a 12% decline.
Investors appear particularly encouraged by the improved profit outlook. Gap raised adjusted FY26 EPS guidance to approximately $2.35–$2.45 from $2.30–$2.40 and increased its adjusted operating-margin forecast to 7.4%–7.6%. This came even as full-year sales growth guidance was trimmed to 1%–1.5%.
The 17% rally suggests investors are rewarding Gap’s improving profitability, strong momentum at its namesake brand and higher earnings expectations, while looking past continued weakness at Old Navy and Athleta.
