Financial Data and Key Metrics Changes - Gap Inc. reported a 2% increase in net sales year over year, reaching $3.5 billion, with comparable sales also up 2% [36][38] - Earnings per share (EPS) grew by 24% to $0.51 compared to the previous year [11][35] - Gross margin improved by 60 basis points to 41.8%, while operating margin increased by 140 basis points to 7.5% [39][35] Business Line Data and Key Metrics Changes - Old Navy's net sales rose by 3% to $2 billion, with comparable sales also up 3%, marking its ninth consecutive quarter of market share gains [37][10] - Gap brand saw a 5% increase in net sales to $724 million, achieving a 5% increase in comparable sales, continuing its positive trend for six consecutive quarters [37][18] - Banana Republic's net sales decreased by 3% to $428 million, with comparable sales remaining flat [38][22] - Athleta's net sales fell by 6% to $308 million, with comparable sales down 8% [38][25] Market Data and Key Metrics Changes - Gap Inc. maintained its position as the number one apparel e-commerce business in the US, reflecting increased e-commerce penetration [6] - Old Navy gained market share across all income cohorts, while Gap gained share in the top and middle cohorts [5][10] Company Strategy and Development Direction - The company is focused on brand reinvigoration, with strategic priorities including financial and operational rigor, driving relevance and revenue, and strengthening the platform [9][26] - Plans to diversify sourcing to mitigate tariff impacts, with a goal for no single country to account for more than 25% of sourcing by 2026 [7][8] - Continued investment in technology and innovation to enhance customer experience and operational efficiency [27][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to navigate a dynamic environment, citing a strong financial foundation and disciplined operations [9][30] - The company reaffirmed its fiscal 2025 outlook, expecting net sales growth of 1% to 2% and operating income growth of 8% to 10%, excluding tariff impacts [36][43] - Management acknowledged potential headwinds from tariffs, estimating a net impact of $100 million to $150 million on operating income for fiscal 2025 [46][47] Other Important Information - The company returned approximately $131 million to shareholders in Q1 through dividends and share repurchases [35][41] - The company ended the quarter with a strong cash balance of approximately $2.2 billion, reflecting effective expense management [35][40] Q&A Session Summary Question: Inquiry about tariff mitigation strategies - Management confirmed that strategies are in place to mitigate over half of the anticipated tariff impact, with ongoing efforts to diversify sourcing [55][56] Question: Discussion on Gap brand's pricing strategy - Management emphasized maintaining the overall value proposition for consumers and does not expect meaningful price impacts at this time [70][71] Question: Inquiry about Banana Republic and Athleta's performance - Management highlighted ongoing progress in Banana Republic and the need for further work in Athleta to improve product appeal and marketing effectiveness [96][97]

Financial Data and Key Metrics Changes - Comparable sales increased by 2% in Q1 2025, with Old Navy's comps up 3% and Gap's comps up 5% [9][36] - Earnings per share (EPS) rose to $0.51, a 24% increase compared to the previous year [10][39] - Operating margin improved by 140 basis points to 7.5% [33][38] - Gross margin expanded by 60 basis points to 41.8% [33][38] - Cash balance at the end of the quarter was approximately $2,200,000,000, reflecting a 28% increase year over year [34][39] Business Line Data and Key Metrics Changes - Old Navy's net sales were $2,000,000,000, up 3% year over year, with consistent performance in active and denim categories [36] - Gap's net sales reached $724,000,000, also up 5% year over year, marking its sixth consecutive quarter of positive comps [36] - Banana Republic's net sales decreased by 3% to $428,000,000, with comparable sales flat [37] - Athleta's net sales fell by 6% to $308,000,000, with comparable sales down 8% [37] Market Data and Key Metrics Changes - Gap Inc. ranked as the number one apparel e-commerce business in the U.S., with e-commerce penetration increasing year over year [5] - Old Navy gained market share in both top and bottom income cohorts, while Gap gained share in top and middle cohorts [4] Company Strategy and Development Direction - The company is focused on brand reinvigoration, with clear strategic priorities aimed at long-term growth [5][8] - Plans to diversify sourcing to mitigate tariff impacts, with China expected to account for less than 3% of sourcing by the end of 2025 [6][7] - Investments in technology and supply chain improvements are prioritized to enhance operational efficiency and customer experience [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about navigating a dynamic environment while maintaining a strong financial foundation [8][29] - The company reaffirmed its fiscal 2025 outlook, expecting net sales growth of 1% to 2% and operating income growth of 8% to 10%, excluding tariff impacts [35][41] - Management acknowledged potential headwinds from tariffs but emphasized ongoing efforts to mitigate these impacts [32][46] Other Important Information - The company returned approximately $131,000,000 to shareholders in Q1 through dividends and share repurchases [33][39] - Capital expenditures for the quarter were $83,000,000, with a full-year expectation of $600,000,000 [39][47] Q&A Session Summary Question: Inquiry about tariff mitigation strategies - Management confirmed strategies are in place to mitigate over half of the anticipated tariff impact, with ongoing diversification of sourcing [51][53] Question: Discussion on Gap brand's full-price selling and customer acquisition - Management highlighted successful campaigns and collaborations driving full-price sell-through and attracting new customers across generations [62][64] Question: Inquiry about Banana Republic and Athleta's performance - Management noted Banana Republic's flat comp and ongoing progress, while emphasizing the need for further work on Athleta to improve product appeal [96][97]