Company Reports

We believe Gap lacks an intangible asset or cost advantage that would provide an economic moat. The company has struggled to generate sales growth, and its margins are below historical highs. Even so, CEO Richard Dickson has done an admirable job of stabilizing this long-suffering business.

Gap's second-quarter same-store sales fell 1% as a 10% increase at its namesake (23% of sales) did not offset Old Navy's 4% decline (57%). Excluding a tariff refund, gross margin rose 20 basis points to 41.4% on higher prices, but operating margin dropped to 7.1% from 7.8% on lower sales.

We believe Gap lacks an intangible asset or cost advantage that would provide an economic moat. The company has struggled to generate sales growth, and its margins are below historical highs. Even so, CEO Richard Dickson has done an admirable job of stabilizing this long-suffering business.

With comparable sales growth of 1% at Old Navy (57% of sales) and 10% at its namesake (23%), Gap had 2% comparable sales growth in 2026's first quarter. Gap's gross and adjusted operating margins declined 130 and 230 basis points, respectively, to 40.5% and 5.2% on tariffs and planned investments.

We believe Gap lacks an intangible asset or cost advantage that would provide an economic moat. The company has struggled to generate sales growth, and its margins are below historical highs. Even so, CEO Richard Dickson has done an admirable job of stabilizing this long-suffering business.

Led by a 7% increase from its namesake brand (25% of sales) and 3% from Old Navy (54%), Gap had 3% same-store sales growth in 2025's fourth quarter. Its gross and operating margins both fell 80 basis points to 38.1% and 5.4%, respectively, due to a 2-percentage-point increase in net tariff cost.

We believe Gap lacks an intangible asset or cost advantage that would provide an economic moat. The company has struggled to generate sales growth, and its margins are below historical highs. Even so, CEO Richard Dickson has done an admirable job of stabilizing this long-suffering business.

In the third quarter, Gap reported net sales of $3.9 billion (up 3%) with consolidated comparable sales increasing 5%, led by Gap and Old Navy comparable store sales growth of 7% and 6%, respectively. However, Athleta weighed on results, with net sales and comparable sales both declining 11%.

We believe Gap lacks an intangible asset or cost advantage that would provide an economic moat. The company has struggled to generate sales growth, and its margins are below historical highs. Even so, CEO Richard Dickson has done an admirable job of stabilizing this long-suffering business.

Led by 2% and 4% marks at Old Navy and its namesake brand, respectively, Gap achieved 1% overall comparable sales growth in second-quarter 2025. On the downside, Athleta's sales (8% of total) fell 11% and weighed on Gap's operating margin, which declined 10 basis points to 7.8%.

We believe Gap lacks an intangible asset or cost advantage that would provide an economic moat. The company has experienced years of inconsistent results. Still, Gap has fair liquidity, and we view its Old Navy nameplate as a solid business. According to Euromonitor, it is the largest individual apparel brand by retail sales in the US, and, despite ongoing issues, we view Gap's goal of $10 billion in annual sales for Old Navy (up from $8.4 billion in 2024) as achievable by the end of this decade. The concept, though, faces considerable competition in the discount apparel space and already has about 1,250 North America stores, so much of its future growth is expected to come from stores in smaller, unproven markets. As we are wary of the potential of these markets, we do not view Gap's stated goal of 2,000 Old Navy stores in North America as reasonable. Rather, we forecast it will add about 200 stores over the next 10 years.

Gap had 2% same-store sales growth in first quarter 2025, as Old Navy achieved a 3% increase. The firm's gross and operating margins rose 60 and 140 basis points, respectively, to 41.8% and 7.5%. However, tariff concerns caused shares to fall 15% on May 29 post-market trading.

We believe Gap's family of brands lacks an intangible asset or cost advantage that would provide an economic moat. The company has experienced years of inconsistent results. Still, Gap has fair liquidity, and we view its Old Navy chain as a solid business. According to Euromonitor, it is the largest individual apparel brand by retail sales in the US, and, despite ongoing issues, we view Gap's goal of $10 billion in annual sales for Old Navy (up from $8.4 billion in 2024) as achievable by the end of this decade. The concept, though, faces considerable competition in the discount apparel space and already has about 1,250 North America stores, so much of its future growth is expected to come from stores in smaller, unproven markets. As we are wary of the potential of these markets, we do not view Gap's stated goal of 2,000 Old Navy stores in North America as reasonable. Rather, we forecast it will add about 200 stores over the next 10 years.

We intend to lift our $27 per share fair value estimate by a mid-single-digit rate after Gap revealed fourth-quarter results and a 2025 outlook above our expectations. Although we rate Gap as no-moat firm due to its years of struggles, CEO Richard Dickson has made progress in restoring some relevance to its four brands. Its financial stability has also improved as it achieved free cash flow to equity above $1 billion for the second consecutive year in 2024. Gap’s shares rose by about 18% in March 6 postmarket trading but remain attractive.

We believe Gap’s family of brands lacks an intangible asset or cost advantage that would provide an economic moat. The company has experienced years of inconsistent results. Still, Gap has fair liquidity, and we view its Old Navy chain as a solid business. According to Euromonitor, it is the largest individual apparel brand by retail sales in the United States, and, despite ongoing issues, we view Gap’s goal of $10 billion in annual sales for Old Navy (up from $8.2 billion in 2023) as achievable by the end of this decade. The concept, though, faces considerable competition in the discount apparel space and already has more than 1,250 North America stores, so much of its future growth is expected to come from stores in smaller, unproven markets. As we are wary of the potential of these markets, we do not view Gap’s stated goal of 2,000 Old Navy stores in North America as reasonable. Rather, we forecast it will have just over 1,450 locations in 10 years.

No-moat Gap’s third-quarter profitability surpassed our expectations on a strong gross margin and cost control. Shares rose 16% in Nov. 21 postmarket trading and now trade close to our $26.50 fair value estimate, which we expect to lift by a low-single-digit percentage.

We believe Gap’s family of brands lacks an intangible asset or cost advantage that would provide an economic moat. The company has experienced years of inconsistent results and has recently suffered major merchandizing and supply chain woes. Still, Gap has fair liquidity, and we view its Old Navy chain as a solid business. According to Euromonitor, it was the second-largest individual apparel brand by retail sales in the United States in 2023, and, despite ongoing issues, we view Gap’s goal of $10 billion in annual sales for Old Navy (up from $8.2 billion in 2023) as achievable by the end of this decade. The concept, though, faces considerable competition in the discount apparel space and already has nearly 1,250 North America stores, so much of its future growth is expected to come from stores in smaller, unproven markets. As we are wary of the potential of these markets, we do not view Gap’s stated goal of 2,000 Old Navy stores in North America as reasonable. Rather, we forecast it will have just over 1,400 locations in 10 years.

Overcoming a tough North American apparel market, Gap reported solid second-quarter results. Since joining the company last year, CEO Richard Dickson has implemented changes in personnel, merchandising, marketing, and operations that have reinvigorated its brands. Most importantly, Old Navy, which accounted for 57% of the quarter’s sales and is the main driver of profits, has returned to comparable sales growth (5% in the period). We expect to lift our $26 fair value estimate by a low-single-digit percentage, leaving shares a bit undervalued. Although we rate Gap as a no-moat company, we think it has strengths, including the high awareness of its brands and their appeal to many demographic groups.

We believe Gap’s family of brands lacks an intangible asset or cost advantage that would provide an economic moat. The company has experienced years of inconsistent results and has recently suffered major merchandizing and supply chain woes. Still, Gap has fair liquidity, and we view its Old Navy chain as a solid business. According to Euromonitor, it was the second-largest individual apparel brand by retail sales in the United States in 2023, and, despite ongoing issues, we view Gap’s goal of $10 billion in annual sales for Old Navy (up from $8.2 billion in 2023) as achievable by the end of this decade. The concept, though, faces considerable competition in the discount apparel space and already has nearly 1,250 North America stores, so much of its future growth is expected to come from stores in smaller, unproven markets. As we are wary of the potential of these markets, we do not view Gap’s stated goal of 2,000 Old Navy stores in North America as reasonable. Rather, we forecast it will have just over 1,400 locations in 10 years.

No-moat Gap’s shares soared 23% in May 30 postmarket trading as first-quarter sales and profitability surpassed expectations despite uneven consumer demand for apparel. Although CEO Richard Dickson has a lot of work to do to generate consistent sales growth at each of Gap’s four brands while operating more efficiently, his personnel, product, and operating changes have already reinvigorated a company that had been floundering for years. We expect to lift our $24 fair value estimate on Gap’s shares by a high-single-digit percentage, but they are fully valued after the move.