U.S. apparel giant Gap Inc. reported its first-quarter fiscal 2026 results on May 28, posting net sales of $3.497 billion, up 1% year-over-year. Comparable sales increased 2%, marking the company’s ninth consecutive quarter of positive comparable sales growth.
Summary
- Gap Inc.’s first-quarter fiscal 2026 revenue increased 1% year-over-year to $3.497 billion.
- Comparable sales rose 2%, marking the ninth consecutive quarter of positive growth.
- The Gap brand delivered standout performance, with both sales and comparable sales increasing 10%.
- Old Navy and Banana Republic maintained positive growth, while Athleta reported a 12% decline in sales.
- The company raised its full-year adjusted EPS outlook to a range of $2.30 to $2.40.
Over the past several years, Gap Inc. has been executing a transformation strategy focused on brand revitalization and profitability improvement. The latest earnings report highlights both the progress achieved and the challenges that remain.
Most notably, the Gap brand delivered double-digit growth and emerged as the company’s strongest performer, while Athleta continued to face significant headwinds, underscoring the diverging trajectories within Gap Inc.’s portfolio.
Sales Growth Supported by Strong Store Performance
First-quarter net sales reached $3.497 billion, representing a 1% increase compared to the same period last year. Comparable sales rose 2%, extending the company’s streak of positive comparable sales growth to nine consecutive quarters.
By channel, store sales increased 3% year-over-year, while online sales declined 2%. E-commerce represented 38% of total net sales during the quarter.
Gross margin came in at 40.5%. Although down 130 basis points from the prior year, the result exceeded the company’s expectations. Tariff-related costs weighed on profitability, but improved inventory management and product mix optimization helped offset some of the pressure.
Gap Brand Emerges as the Standout Performer
The most notable highlight of the quarter was the continued momentum of the Gap brand.
Net sales increased 10% year-over-year to $796 million, while comparable sales also rose 10%. Strong performance in key categories such as denim, fleece, kids, and baby reinforced the effectiveness of the brand’s ongoing revitalization strategy.
Richard Dickson, President and Chief Executive Officer of Gap Inc., commented: “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.”
Old Navy and Banana Republic Maintain Steady Growth
Old Navy, the company’s largest brand, reported net sales of $1.996 billion, up 1% from the prior year. Comparable sales also increased 1%, supported by continued strength in denim, activewear, and kids and baby categories.
Meanwhile, Banana Republic posted net sales of $431 million, up 1% year-over-year, while comparable sales increased 2%. The brand has now achieved four consecutive quarters of positive comparable sales growth.
Demand remained steady across both men’s and women’s categories, reflecting ongoing improvements in merchandising and brand storytelling.
Athleta Remains a Key Challenge
Athleta continued to face pressure during the quarter.
Net sales declined 12% year-over-year to $270 million, while comparable sales fell 11%.
The company stated that it remains focused on a long-term brand reset and plans to introduce a stronger, reimagined assortment in the second half of fiscal 2026.
As competition in the activewear market intensifies, Athleta’s turnaround remains one of the most important priorities for Gap Inc.’s long-term growth strategy.
Shareholder Returns Continue to Increase
Supported by improving financial performance, Gap Inc. continued to return significant capital to shareholders.
During the first quarter, the company returned a total of $464 million through share repurchases and dividends. This included $401 million in share buybacks and $63 million in dividends.
The quarterly dividend increased 6% year-over-year to $0.175 per share.
Gap Inc. also ended the quarter with $2.6 billion in cash and short-term investments, up 15% from the prior year, further strengthening its balance sheet position.
Full-Year Earnings Outlook Raised
The company raised its fiscal 2026 adjusted earnings-per-share outlook to a range of $2.30 to $2.40, up from its previous forecast of $2.20 to $2.35.
At the same time, Gap Inc. maintained its full-year sales outlook of 1% to 2% growth, reflecting continued caution regarding consumer spending trends and tariff-related uncertainties.
Nevertheless, if the Gap brand can sustain its momentum and Athleta’s turnaround efforts begin to gain traction, investor confidence in the company’s broader growth story could strengthen further in the months ahead.
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