So here's the thing about retail earnings: sometimes a big, shiny announcement isn't enough to distract from the numbers on the page. Gap Inc. (GAP) learned that lesson Thursday evening.
The apparel giant reported fourth-quarter results that missed expectations on both the top and bottom lines. Revenue came in at $4.236 billion, just shy of the $4.244 billion analysts were looking for. Earnings per share landed at 45 cents, a penny below the 46-cent estimate.
To be fair, it wasn't all bad news. Net sales were up 2% year-over-year, and comparable sales climbed 3%. Online sales grew 5% and now make up 42% of total sales, while store sales were flat. But when you're a giant like Gap, investors tend to focus on whether you hit the targets, not just whether you grew.
Let's break down how the different brands performed. Old Navy and the namesake Gap brand both saw comparable sales rise 3%. Banana Republic did a bit better, up 4%. The real sore spot was Athleta, which saw comparable sales tumble 10%. That's a significant drag on the overall portfolio.
"The execution of our playbook is driving consistent results, as we achieved our second consecutive year of topline growth and eighth consecutive quarter of positive comparable sales," said Richard Dickson, Gap's president and CEO. He's right about the consistency, but the market was clearly hoping for a beat, not just consistency.
Perhaps trying to soften the blow, Gap's board authorized a new $1 billion share repurchase program, replacing the old one. The company also noted it bought back seven million shares for $155 million during 2025. That's a classic move—when the earnings aren't quite what you hoped, return some cash to shareholders and remind them you're thinking about their value.
The problem is, investors didn't seem to buy it. Literally. Gap shares were down more than 7% in premarket trading Friday, falling to around $25.28.
Looking ahead, the guidance was... fine. For the first quarter, Gap expects sales between $3.535 billion and $3.570 billion, compared to analyst estimates of $3.531 billion. For the full year, the company sees revenue of $15.71 billion to $15.86 billion versus estimates of $15.75 billion, and adjusted earnings of $2.20 to $2.35 per share versus estimates of $2.32.
It's essentially a guide that says, "We think we'll do about what you expect." In earnings season, that's often not enough to get people excited, especially when you just missed the last quarter.
Dickson added some forward-looking color, saying, "As we move into the next phase of our transformation, we remain focused on growing our core apparel business through continuous improvement while thoughtfully seeding growth accelerators that will scale over time." Translation: we're working on fixing what's broken and planting seeds for future growth. Investors will want to see those seeds sprout soon.
The company ended the quarter with $2.2 billion in inventory and about $3 billion in cash and short-term investments. Leadership was discussing the results on an earnings call that started at 5 p.m. ET Thursday.
So what's the takeaway? Gap is growing, but not quite as fast as Wall Street wanted. It's buying back stock, but that wasn't enough to stop the sell-off. And while most of its brands are doing okay, Athleta is dragging down the average. In the retail game, sometimes "consistent" just isn't enough to keep the stock from taking a tumble.
