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Research Alert: Gap Posts Mixed Quarter; Raises Eps Guidance

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CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:

GAP delivered mixed Q1 2026 results with net sales of $3.5B (+1% Y/Y), $27M below estimates, though comparable sales rose 2% for the ninth consecutive quarter. Gross margin of 40.5% declined 130 bps Y/Y due to tariff headwinds of approximately 200 bps impact. The standout was Gap brand's exceptional 10% comparable sales growth, representing one of its strongest performances in over two decades driven by culturally relevant storytelling and strength in denim and fleece. The company raised full-year EPS guidance to $2.30-$2.40 from $2.20-$2.35, expecting $80M of net tariff relief concentrated in Q2 and Q3. GAP returned $464M to shareholders through buybacks and dividends, including a $200M accelerated share repurchase program. Shares fell 13% after-hours and trade at 10x full-year EPS guidance. We believe the after-hours move is an overreaction and are impressed with Gap brand strength. We think the company's buyback program and pricing power help offset tariff impacts.

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