Gap Inc. reported Q1 2026 results on May 28, posting $3.5 billion in net sales and the ninth consecutive quarter of positive comparable sales, while the namesake Gap brand delivered its strongest comp performance in more than two decades. The San Francisco-based parent of Old Navy, Athleta and Banana Republic raised its full-year earnings outlook even as tariff costs forced it to trim its sales forecast, according to the company’s official Q1 2026 earnings press release. Shares fell roughly 14% in after-hours trading to about $21.50.
The Gap Inc Q1 2026 results land in a fashion retail earnings season that has already produced standout numbers from peers including Aerie’s 25% Q1 2026 comparable sales gain and Capri Holdings’ Q4 earnings.
Q1 2026 Financial Highlights
Net sales of $3.5 billion rose 1% year-over-year. Comparable sales increased 2%, the ninth straight positive quarter for the portfolio. Operating income jumped to $445 million from $260 million a year ago. Net income reached $339 million versus $193 million in the prior-year period.
Gross margin came in at 40.5%, down 130 basis points, pressured by tariffs. Free cash flow totaled $78 million. Cash on hand grew 15% to $2.6 billion. The company returned $464 million to shareholders through buybacks and dividends during the quarter, with $599 million remaining under its buyback authorization. Online sales accounted for 38% of total sales across roughly 3,500 global store locations.
The revenue print missed Wall Street estimates even as adjusted earnings beat — the dynamic that triggered the after-hours selloff. For context on US fashion peers, Ralph Lauren’s record $8B FY2026 revenue set a high bar this earnings cycle.
Gap Brand Delivers Strongest Comparable Sales in Over Two Decades
The Gap brand posted $796 million in net sales, up 10%, with comparable sales also up 10% — the 10th consecutive positive quarter and the strongest comp performance in more than 20 years, according to the company. Denim and fleece led the assortment.
The brand’s “Sweats Like This” music-video campaign generated 1.5 billion press and social media impressions, management said. “Gap is a great story…This was our tenth consecutive quarter of positive comps,” President and CEO Richard Dickson said on the earnings call.
Old Navy’s Spring Dress Assortment Falls Short
Old Navy net sales hit $2.0 billion, up 1%, with comparable sales also up 1%. The active category posted its seventh consecutive quarter of growth. Management flagged the dress and seasonal categories as the soft spot, citing assortment and value-equation gaps.
“It’s not a consumer issue,” Dickson said of the dress shortfall. Looking ahead, Old Navy is expanding beauty into a 150-store pilot and preparing to launch its Old Navy Sport format in the back half of 2026.
Athleta Slides 12% as Turnaround Hits Speed Bumps
Athleta sales fell 12% to $270 million. Comparable sales declined 11%. Management attributed the drag primarily to legacy inventory clearance and called 2026 a rebuild year for the activewear banner.
Newer product — including the Journey travel collection and Elation leg shapes — is showing early traction, executives said. Athleta competes in a category where Deckers Brands’ FY2026 record results have raised the bar for performance and lifestyle apparel.
Banana Republic Posts Fourth Consecutive Positive Quarter
Banana Republic delivered $431 million in net sales, up 1%, with comparable sales up 2% — the brand’s fourth straight quarter of positive comps. Banana Republic’s incoming CEO Donald Kohler takes the helm in July 2026.
Tariff Headwinds Force Sales Forecast Trim; EPS Guidance Raised
Gap Inc. now expects tariff-related costs that could reach $300M on a gross basis for fiscal 2026. After mitigation, the net hit to operating income is projected at $100 million to $150 million.
The company trimmed its FY2026 net sales growth forecast to 1% to 2%, from 2% to 3% previously. It raised adjusted EPS guidance to $2.30 to $2.40, up from $2.20 to $2.35. Adjusted operating margin is targeted at 7.3% to 7.5%.
“We haven’t seen any change in consumer behavior, which is good news.” — Richard Dickson, President and CEO, Gap Inc.
Additional corporate disclosures are available via the Gap Inc. newsroom. For continuing coverage of fashion retail earnings, read more news on FloraDress.
