Gap shares surge 14% after earnings beat expectations

Gap Inc. reported fresh quarterly results on Thursday, March 6, that beat expectations, suggesting that its turnaround under CEO Richard Dixon is working better — and faster — than Wall Street expected.

Shares of the company jumped 14% in after-hours trading on Thursday.

The apparel retailer, which owns the Old Navy, Banana Republic, Athleta and Gap brands, beat earnings and revenue expectations for the holiday quarter, seeing comparable sales grow 3%, beating expectations for a 1% gain, according to StreetAccount.

-Fiscal Q4 earnings per share: 54 cents vs. 37 cents expected by LSEG.

-Fiscal Q4 revenue: $4.15 billion vs. $4.07 billion expected by LSEG.

The company’s reported net income for the three-month period ended Feb. 1 was $206 million, or 54 cents a share, compared with $185 million, or 49 cents a share, in the year-ago period, according to CNBC.

Sales fell to $4.15 billion in the quarter, down about 3% from $4.30 billion in the comparable quarter. Like other retailers, Gap benefited from an extra week of sales in the year-ago period, which skewed comparisons.

For fiscal 2025, Gap expects sales to grow between 1% and 2%, in line with expectations for a 1.7% increase, according to LSEG. For the current quarter, its guidance was slightly weaker than expected. It expects sales to be “flat or slightly higher,” compared with Wall Street’s estimate of a 1.5% increase.

This comes about a year and a half since Dixon took over as Gap’s CEO. Under his stewardship, the company has returned to growth and revamped its brand image—and in fiscal 2024, it posted its highest gross profit margin in more than 20 years, at 41.3%.

The former Mattel executive credited with reviving the Barbie empire has brought the same skill set to the GAP brand. After a fourth straight quarter of strong results, the strategy appears to have staying power.

Gap’s creative director Zac Posen has recently been worn by celebrities like Timothée Chalamet, and even the underperforming Banana Republic brand has returned to growth. Athleta, the hip sportswear brand, is still struggling, but the company has managed to halt the decline and is no longer shrinking.