Gap Inc has extended its long streak of positive comparable sales growth with another set of solid results in the first quarter of FY26.
The company posted a 2 per cent increase in comparable sales in the quarter ended May 2, marking its ninth quarter of consecutive growth.
Net sales also rose 1 per cent to $3.5 billion, following the 2 per cent in last year’s fourth quarter.
“Gap’s performance, while not spectacular across the board, is solid enough,” commented GlobalData MD Neil Saunders. “Such consistency matters as it shows the group’s strategy is broadly delivering as it becomes embedded across the brands.”
That said, Saunders noted some uneven performances, as some brands did not have enough momentum to overcome the softness that has crept into the external environment.
According to the analyst, the Gap brand was “the star of the show”, with US sales soaring 11.6 per cent on a reported basis and 10 per cent on a comparable basis.
“In our view, it represents an impressive advance for a brand that was, not so long ago, constantly losing ground. It also shows the importance of cultural relevance, which is something Richard Dickson has tried to build since starting as CEO,” Saunders said.
“Gap is now showing up in places and spaces where younger consumers are present and this, along with sharp marketing and celebrity collaborations, has given the brand a cool factor that it has lacked for a long time.
“Gentle range improvements have also aided conversion and sales. Importantly, the improved brand heat – along with more discipline in buying – has allowed Gap to reduce discounting without damaging sales,” he added.
At Old Navy, comparable sales grew 1 per cent during the quarter, which Saunders said was not quite robust, but not disastrous either.
The brand is more about staples and routine family shopping, the two areas that came under some pressure during the quarter, especially as many households were spooked by higher gas prices, the analyst said.
At Banana Republic, comparables grew by a “pleasing” 2 per cent. According to Saunders, the brand is continuing to gain ground thanks to elevated storytelling and a much better product mix, while newer stores also did a great job of showcasing the brand essence.
Athleta remains the most challenged part of the business, with comparable sales down 11 per cent. Saunders said the current assortments are a little dull and do not represent great value for money, and the brand is also not distinct enough in a crowded market.
On the bottom line, the company’s net income improved from $193 million a year ago to $339 million.
Management has lowered its top-line guidance for the full year, expecting net sales to be 1-2 per cent versus the prior 2-3 per cent range.
“The group is still predicting growth – which is a win – but sees some choppiness across the year,” Saunders said. “On one level, this is fair as the consumer environment will be more pressured. But on another, Gap needs to show it can keep all engines whirring away as it capitalizes on its various initiatives.”
