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3mo ago

Gap Inc. Delivers Q1 Earnings Beat but Warns of $100M–$150M Tariff Impact

To offset the anticipated hit, the retailer is diversifying manufacturing away from China, boosting US cotton purchases, realigning its global supply chains

Sweatshirts inside a Gap store in the Times Square neighborhood of New York, US, on Monday, Nov. 13, 2023.
A person shops on Thanksgiving at a Gap store in Times Square, ahead of Black Friday, in New York City, U.S., November 28, 2024. REUTERS/Brendan McDermid/File Photo
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FILE – A nurse prepares a syringe of a COVID-19 vaccine at an inoculation station in Jackson, Miss., July 19, 2022. U.S. health officials are proposing a simplified approach to COVID-19 vaccinations, which would allow most adults and children to get a once-a-year shot to protect against the mutating virus. The new system unveiled Monday, Jan. 23, 2023 would make COVID-19 inoculations more like the annual flu shot. Americans would no longer have to keep track of how many shots they’ve received or how many months it’s been since their last booster.

Overview

  • Gap Inc. reported first-quarter net income of $193 million and net sales of $3.5 billion, marking a 2 percent year-over-year increase.
  • The company projects gross tariff costs of $250 million to $300 million in fiscal 2025 with a net impact of $100 million to $150 million after mitigation measures, predominantly in the back half of the year.
  • Old Navy and Gap led brand performance with sales up 3 percent and 5 percent respectively, while Banana Republic and Athleta saw declines of 3 percent and 6 percent.
  • Gap plans to curtail sourcing from China to under 3 percent of its merchandise by year-end and double its use of US-grown cotton by 2026 as part of its mitigation strategy.
  • The retailer reaffirmed its fiscal 2025 guidance for 1 to 2 percent revenue growth and 8 to 10 percent operating income growth, excluding the expected tariff impact.