Winter storms impact Gap and Old Navy with 800 temporary store closures

• Old Navy comparable sales rose 3%, missing analyst expectations of 4.3% growth due to weather disruptions, while Gap brand comparable sales jumped 7%, beating expectations of 4.6%
• Full-year revenue guidance of 2-3% growth is in line with expectations, with potential upside if the current 15% tariff rate remains as it is 'slightly below' previous rates Gap had planned for
• Gap has accumulated $3 billion in cash and is shifting focus to scaling new growth initiatives including beauty, accessories, and entertainment ventures, with Athleta struggling most with comparable sales down 10%

Summary

Gap Inc. reported mixed fiscal Q4 results (ended Jan. 31), missing bottom-line expectations due to severe winter storms that forced approximately 800 temporary store closures at their peak in January. The company posted net income of $171 million ($0.45 per share) and revenue of $4.24 billion, up 2% year-over-year, meeting consensus.

Brand Performance:

• Old Navy: Sales rose 3% to $2.3 billion with comparable sales up 3%, missing the 4.3% analyst expectation
• Gap: Strongest performer with sales up 8% to $1.1 billion and comparable sales up 7%, beating the 4.6% forecast
• Banana Republic: Achieved third consecutive quarter of positive comparable sales (+4%, beating 2.5% estimate); revenue up 1% to $549 million
• Athleta: Continued struggles with revenue down 11% to $354 million and comparable sales down 10%

Guidance: FY outlook calls for 2-3% sales growth (in line with consensus) and Q1 revenue growth of 1-2% (slightly below the 2% expectation). A $313 million legal settlement impacted current quarter results.

Tariff Impact: Gap did not factor recent tariff changes into guidance but noted the current 15% tariff rate is below previous levels, which could provide "modest benefit to operating income" and improved margins later in the year if maintained.

Strategic Direction: CEO Richard Dickson, over two years into his turnaround plan, emphasized building on improved profitability and a $3 billion cash reserve, focusing on core apparel growth while exploring expansion into beauty, accessories, and entertainment ventures set to scale in 2027.