Gap's Brand Momentum Strengthens: What Comes Next in 2026?

The Gap, Inc.’s GAP multiyear turnaround strategy is gaining traction. The retailer has made measurable strides in brand execution and operational efficiency, laying the groundwork for a more stable growth profile. As the company moves into 2026, attention turns to the next phase of the recovery and the strategic levers that could define Gap’s longer-term outlook.

The Gap brand itself has become a key driver of this turnaround. Better product assortments, clearer messaging and a stronger brand identity are helping attract more customers and support full-price sales. Creative marketing and well-timed collaborations have helped reposition the company as a modern lifestyle brand rather than one dependent on heavy promotions.

At the same time, not all brands are performing equally. Banana Republic is showing gradual improvement as it sharpens its product focus and adjusts its store footprint, though progress remains measured. Athleta continues to face challenges, with competition and repositioning efforts weighing on results. Management has made it clear that Athleta’s recovery will take time, making 2026 more about rebuilding the brand than delivering quick gains. Overall, continued strength at Gap and Old Navy, combined with steady improvement elsewhere, could shape the company’s direction as it enters the next phase of its transformation.

Looking toward 2026, consistent execution across the brand portfolio will remain critical. Old Navy continues to provide stability through its strong value offering and broad appeal, while Gap’s improving performance supports healthier margins. Together, these brands give the company room to invest in marketing, supply chain improvements and store optimization without putting pressure on profitability.

The focus is shifting toward turning recent brand gains into more consistent profit growth. On its latest earnings call, management guided sales growth toward the upper end of its 1.7%-2% range. While tariffs remain a near-term headwind, initiatives around sourcing, pricing and assortment are expected to reduce their impact over time. With Old Navy and Gap delivering steady performance and Athleta in a longer-term reset, the company is heading into 2026 with a more balanced foundation.

GAP’s Price Performance, Valuation & Estimates

Shares of this Zacks Rank #1 (Strong Buy) company have gained 26.4% in the past six months compared with the industry’s growth of 8.8%.

From a valuation standpoint, GAP trades at a forward price-to-earnings ratio of 11.50X compared with the industry’s average of 16.11X.

The Zacks Consensus Estimate for GAP’s current fiscal-year sales implies year-over-year growth of 1.9%, while the same for earnings per share suggests a decline of 2.7%. For the next fiscal year, the consensus estimate indicates a 2.4% rise in sales and 6.7% growth in earnings. The company’s EPS estimate for both fiscal years has remained stable in the past 30 days.

Other Stocks to Consider

Some other top-ranked stocks are FIGS Inc. FIGS, American Eagle Outfitters Inc. AEO and Stitch Fix SFIX.

FIGS is a direct-to-consumer healthcare apparel and lifestyle brand. It flaunts a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FIGS’ current financial-year earnings and sales suggests growth of 450% and 7.2%, respectively, from the year-ago actuals. FIGS delivered a trailing four-quarter average earnings surprise of 87.5%.

American Eagle is a specialty retailer of casual apparel, accessories and footwear. It sports a Zacks Rank of 1 at present.

The Zacks Consensus Estimate for American Eagle's current fiscal-year earnings implies a decline of 20.7%, while the same for sales suggests growth of 2.7% from the year-ago actuals. AEO delivered a trailing four-quarter average earnings surprise of 35.1%.

Stitch Fix engages in the provision of clothing and accessories in the United States, and currently carries a Zacks Rank of 2 (Buy). SFIX delivered an average earnings surprise of 37.7% in the last four quarters.

The Zacks Consensus Estimate for Stitch Fix’s current financial-year sales and EPS indicates a growth of 6.4% and 9.1%, respectively, from the year-ago figure.

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

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