Core Viewpoint - Gap, Inc. reported third-quarter earnings that exceeded analyst expectations, leading to a rise in share price [1][2]. Financial Performance - The company achieved quarterly earnings of 62 cents per share, surpassing the analyst estimate of 59 cents [2]. - Quarterly revenue reached $3.94 billion, exceeding the analyst consensus estimate of $3.91 billion [2]. Analyst Insights - B of A Securities analyst Lorraine Hutchinson raised the price forecast for Gap shares to $27 from $23 while maintaining a Neutral rating, reflecting positive comparable store sales but cautioning about potential pressure on lower-end customers due to tariffs [3]. - The third-quarter adjusted EPS of 62 cents beat B of A's estimate of 56 cents, attributed to stronger sales and improved gross margins [3]. - Tariffs impacted margins by 190 basis points, but this was offset by average unit retail (AUR) growth and reduced discounting [3]. Future Projections - The analyst anticipates a decline in fourth-quarter gross margin by 80 basis points due to similar tariff pressures, although this may be balanced by commodity benefits and fewer promotional discounts during the holiday season [4]. - Fiscal year 2025 and 2026 EPS estimates were raised by 3% and 14% to $2.14 and $2.18, respectively, reflecting the third-quarter performance and an improved gross margin outlook for FY26 [5]. Market Reaction - Following the earnings report, Gap shares increased by 8.33%, reaching $24.98 at the time of publication [5].
Gap's Price-Sensitive Consumer Faces Tariff Pressure, Analyst Says