Gap posts higher Q3 2025 sales and lifts full-year outlook

Core Insights - Gap reported higher sales across most brands in Q3 of fiscal 2025, with net sales reaching $3.9 billion, a 3% year-on-year increase, and comparable sales rising by 5% [1][5] - The company has raised its full-year net sales growth guidance to 1.7% to 2%, reflecting confidence in its performance [4][6] Financial Performance - Gross margin decreased by 30 basis points to 42.4%, impacted by a 190-basis-point tariff effect, although higher average unit retail helped support performance [2] - Operating income was $334 million, representing an 8.5% margin, while net income totaled $236 million [2] - Diluted earnings per share for the quarter were $0.62 [2] Sales Breakdown - Old Navy achieved net sales of $2.3 billion, up 5%, with comparable sales increasing by 6% [3] - The Gap brand saw a 6% rise in net sales to $951 million and a 7% increase in comparable sales [3] - Banana Republic's net sales fell by 1% to $464 million, but comparable sales rose by 4% [4] - Athleta experienced an 11% decline in both net sales and comparable sales, totaling $257 million [4] Cash Flow and Investments - Year-to-date operating cash flow was $607 million, with free cash flow at $280 million [3] - Inventory increased by 5% to $2.5 billion, primarily due to higher tariff-related costs [3] - Capital expenditure for the period was $327 million, with full-year capital expenditure guidance remaining unchanged at $500 million to $550 million [4] Future Outlook - The company anticipates around 35 net store closures in 2025 [4] - Gap's president and CEO expressed confidence in the company's strategy and performance, positioning it well for the holiday season [5][6]