Is Gap Positioned to Extend Its Q3 Sales Momentum as Key Brands Shine?

Gap Inc. GAP delivered an impressive third-quarter fiscal 2025 performance, highlighted by broad-based strength across its key brands. Company-wide comps rose 5%, the highest in more than four years, while net sales climbed to $3.94 billion, beating estimates. Old Navy, Gap and Banana Republic each delivered positive comparable sales, with Old Navy up 6%, Gap up 7% and Banana Republic up 4%, underscoring the growing resonance of the company’s largest banners and the accelerating impact of its brand reinvigoration strategy. 

Old Navy remains a major driver of GAP’s momentum, supported by strong customer response across its core categories. The brand continues to strengthen its leadership position by delivering trend-right offerings, compelling value and strong storytelling that resonates with a broad demographic range. Collaborations and new category expansions, such as its move into beauty, are helping deepen engagement and strengthen the brand’s cultural relevance, positioning Old Navy as a sustained growth engine for the company.

The namesake Gap brand is experiencing one of its strongest periods in years, driven by improved product execution and culturally connected marketing. Its “Better in Denim” campaign sparked widespread consumer engagement, while the brand’s renewed focus on creative partnerships and trend-led assortments is attracting younger consumers and reestablishing Gap as a relevant, modern lifestyle brand. The continuous string of positive comps underscores the success of its reinvigoration playbook.

Banana Republic also showed encouraging signs, benefiting from elevated product aesthetics, improved fits and strong campaign storytelling. Momentum was supported by a more cohesive assortment strategy and marketing that reinforced the brand’s aspirational, premium lifestyle positioning. While the banner continues to navigate its transformation, the underlying improvements in customer engagement and product resonance suggest that Banana Republic is headed in the right direction.

Looking ahead, Gap raised its fiscal 2025 outlook, expecting sales growth to land at the high end of its prior range and operating margin to be stronger than previously anticipated. While tariffs remain a meaningful headwind, the company continues to benefit from stronger full-price sell-through, disciplined inventory management and improved margin fundamentals. With its largest brands delivering consistent momentum, strategic execution gaining traction and cost discipline supporting profitability, Gap appears well positioned to extend its third-quarter strength into the remainder of fiscal 2025 and beyond.

GAP’s Price Performance, Valuation & Estimates

Shares of Gap have gained 22.8% in the past six months compared with the industry’s rise of 11.4%.

From a valuation standpoint, GAP trades at a forward price-to-earnings ratio of 11.79X compared with the industry’s average of 17.77X.

The Zacks Consensus Estimate for GAP’s fiscal 2025 and 2026 EPS indicates year-over-year growth of 1.78% and 2.23%, respectively. The company’s EPS estimate for both fiscal years has moved northward in the past 30 days.

GAP stock currently carries a Zacks Rank #2 (Buy).

Other Key Picks

Boot Barn Holdings BOOT operates specialty retail stores in the United States and internationally, and carries a Zacks Rank #2 at present. BOOT delivered a trailing four-quarter earnings surprise of 5.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial-year sales and earnings indicate growth of 16.2% and 20.5%, respectively, from the year-ago reported numbers.

American Eagle Outfitters AEO operates as a multi-brand specialty retailer in the United States and internationally, and currently carries a Zacks Rank of 2. AEO delivered a trailing four-quarter earnings surprise of 30.3%, on average.

The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year sales indicates a decline of 0.1% from the year-ago period reported number.

Stitch Fix, Inc. SFIX engages in the provision of clothing and accessories in the United States, and currently carries a Zacks Rank of 2. SFIX delivered an average earnings surprise of 53.7% in the last four quarters.

The Zacks Consensus Estimate for Stitch Fix’s current financial-year sales indicates growth of 4.12% from the year-ago figure.

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This article originally published on Zacks Investment Research (zacks.com).

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