{"id":76661,"date":"2025-11-22T07:40:07","date_gmt":"2025-11-22T07:40:07","guid":{"rendered":"https:\/\/dralysstore.com\/blog\/?p=76661"},"modified":"2025-11-22T07:40:07","modified_gmt":"2025-11-22T07:40:07","slug":"gap-recovery-outweighs-drag-from-tariffs-athleta-in-q3","status":"publish","type":"post","link":"https:\/\/dralysstore.com\/blog\/gap-recovery-outweighs-drag-from-tariffs-athleta-in-q3\/","title":{"rendered":"Gap recovery outweighs drag from tariffs, Athleta in Q3"},"content":{"rendered":"<div>\n<div class=\"text-to-speech\">\n    <button class=\"text-to-speech__button button\"><br \/>\n        <img decoding=\"async\" class=\"text-to-speech__button__icon\" src=\"https:\/\/www.retaildive.com\/static\/img\/play.svg?500116090725\" alt=\"\"\/><br \/>\n        Listen to the article<br \/>\n        <span class=\"text-to-speech__button__audio-length\">4 min<\/span><br \/>\n    <\/button><\/p>\n<div class=\"text-to-speech__controls\">\n        <audio controls=\"\" class=\"js-text-to-speech\" preload=\"none\"><source src=\"https:\/\/text-to-speech.divecdn.com\/newspost\/806123\/2025-11-21_12.12.13\/gap-recovery-tariffs-athleta-drag-sales-earnings-q3.wav\" type=\"audio\/mp3\"><\/source><\/audio><\/p>\n<div class=\"text-to-speech__controls__text\">\n            This audio is auto-generated. Please let us know if you have <a href=\"https:\/\/www.retaildive.com\/contact\/\" target=\"_blank\" rel=\"noopener\">feedback<\/a>.\n        <\/div>\n<\/p><\/div>\n<\/div>\n<h3>Dive Brief:<\/h3>\n<ul>\n<li>\n<p>Gap Inc.\u2019s <a href=\"https:\/\/s204.q4cdn.com\/320226404\/files\/doc_financials\/2025\/q3\/Gap-Inc-Q3-2025-Earnings-Press-Release.pdf\" target=\"_blank\" rel=\"noopener\">Q3 net sales rose 3%<\/a> year over year to $3.9 billion, with its highest comp growth in four years at 5%. E-commerce, which drove 40% of sales, rose 2%, while store sales rose 3%, the apparel retailer said Thursday. Net income shrank nearly 14% to $236 million.<\/p>\n<\/li>\n<li>\n<p>Tariffs did some damage. Merchandise margin contracted 70 basis points from last year, including a net tariff impact of about 190 basis points; overall gross margin contracted by 30 basis points to 42.4%. Inventory of $2.5 billion was up 5% due to higher costs from tariffs.<\/p>\n<\/li>\n<li>\n<p>The company beat expectations in the period and raised its full-year outlook, with net sales now expected to land at the higher end of its guidance. Gap Inc. now expects operating margin to reach 7.2%, including an estimated 100 to 110 basis points of net tariff impact, up from 6.7% to 7% with the same tariff scenario.<\/p>\n<\/li>\n<\/ul>\n<h3>Dive Insight:<\/h3>\n<p>Nearly all of the brands in Gap Inc.\u2019s stable contributed to a standout quarter, at least for its top line.<\/p>\n<p>Old Navy net sales rose 5% to $2.3 billion with comps up 6%, which GlobalData Managing Director Neil Saunders attributed to its value proposition at a time of consumer angst, especially during back-to-school season. Banana Republic net sales fell 1% to $464 million but comps rose 4%, which Gap Inc. CEO Richard Dickson called \u201csteady progress.\u201d<\/p>\n<p>Dickson seemed most excited by the rise of Gap, where net sales rose 6% to $951 million and comps rose 7%, its eighth straight quarter of comp growth.<\/p>\n<p>\u201cGap&#8217;s execution of the playbook has been fantastic, and it&#8217;s been exciting to see the brand building on their success quarter after quarter, while continuing to drive distinction and relevance,\u201d Dickson told analysts Thursday. \u201cIt&#8217;s a brand that knows who it is, where it&#8217;s going and how to win, and we&#8217;re looking forward to carrying that momentum into the holiday season.\u201d<\/p>\n<p>Saunders does recognize a sea change at the namesake label, though he also sees more work to be done. Younger consumers are driving growth there, signaling a cultural relevance it hasn\u2019t enjoyed in years, per GlobalData research.<\/p>\n<p>\u201cNow, there is a point to be made that more clarity in ranges and styling is needed and that Gap needs a firmer point of view \u2014 including more innovations in things like fabric technology,\u201d he said in emailed comments. \u201cThat&#8217;s fair, but it is part of the plan now that Gap has a more significant audience to build with.\u201d<\/p>\n<p>It is a different story at Athleta, where Q3 net sales fell 11% to $257 million and comps also tumbled 11%, a dire result in what Saunders calls a \u201csofter and way more competitive\u201d athleisure segment.<\/p>\n<p>\u201cThe 11% decline in comparable sales suggests an urgent fix is needed, or that Gap needs to strategically reevaluate whether it wants to keep this brand in its stable,\u201d Saunders said.<\/p>\n<p>But Dickson reiterated the company\u2019s belief in the brand, cautioning analysts that it\u2019s \u201cat the beginning of its reinvigoration journey.\u201d Maggie Gauger, who <a href=\"https:\/\/www.retaildive.com\/news\/nike-veteran-athleta-brand-ceo\/756141\/\" target=\"_blank\" rel=\"noopener\">arrived from Nike<\/a> over the summer as brand chief, is making the right moves, including \u201cediting the assortment, studying the consumer, evaluating our retail footprint and, of course, the overall customer experience.\u201d<\/p>\n<p>\u201cWe&#8217;re not hiding from Athleta,\u201d he said. \u201cIt&#8217;s a very important brand in our portfolio.\u201d<\/p>\n<p>In general, Gap Inc.\u2019s strength derives from its diverse brands, which allows it to serve a diverse set of consumers, including from all income groups, Dickson said.\u00a0This sentiment seemed to overshadow any worry from tariffs, which are now a known quantity, on the part of executives and analysts alike. It helps that Gap Inc. in general remains profitable, Saunders said.<\/p>\n<p>\u201cThe challenge was always to fix the top line, and that job is being done,\u201d he said.<\/p>\n<\/p><\/div>\n<p><\/p>\n<hr>\n<p><strong>Published by Dralys Blog \u2013 Stories | Insights | Innovation<\/strong><\/p>\n<p>Discover more on <a href=\"https:\/\/www.dralysstore.com\" target=\"_blank\">DralysStore.com<\/a><\/p>\n<div class=\"pld-like-dislike-wrap pld-template-2\">\r\n    <div class=\"pld-like-wrap  pld-common-wrap\">\r\n    <a href=\"javascript:void(0)\" class=\"pld-like-trigger pld-like-dislike-trigger  \" title=\"\" data-post-id=\"76661\" data-trigger-type=\"like\" data-restriction=\"no\" data-already-liked=\"0\">\r\n                        <i class=\"fas fa-heart\"><\/i>\r\n                <\/a>\r\n    <span class=\"pld-like-count-wrap pld-count-wrap\">    <\/span>\r\n<\/div><\/div>","protected":false},"excerpt":{"rendered":"<p>Listen to the article 4 min This audio is auto-generated. Please let us know if&hellip;<\/p>\n","protected":false},"author":1,"featured_media":75526,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[36],"tags":[74,34,65,176,45,177,10],"class_list":["post-76661","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-dralys-insights","tag-dralys","tag-e-commerce","tag-entrepreneurship","tag-ecosystem","tag-innovation","tag-smart-shopping","tag-technology"],"acf":[],"jetpack_featured_media_url":"https:\/\/dralysstore.com\/blog\/wp-content\/uploads\/2025\/11\/play.svg.svg+xml","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/posts\/76661","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/comments?post=76661"}],"version-history":[{"count":1,"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/posts\/76661\/revisions"}],"predecessor-version":[{"id":76662,"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/posts\/76661\/revisions\/76662"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/media\/75526"}],"wp:attachment":[{"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/media?parent=76661"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/categories?post=76661"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dralysstore.com\/blog\/wp-json\/wp\/v2\/tags?post=76661"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}