Can Gap's Flagship Brand Continue to Sustain Momentum Ahead?

The Gap, Inc. GAP remains committed to shaping culture and instilling confidence through its high-performing group of iconic American brands, including Old Navy, Gap, Banana Republic and Athleta. Gap, the company’s namesake brand, is its second-largest brand after Old Navy.  The flagship brand ensures a foundation of stability through a blend of seasonal fashion trends and core wardrobe staples. It offers superior-quality, comfortable clothing, everything from denim and basics to seasonal fashion styles. Amid tough times, the flagship brand has offered resilience through its broad consumer appeal, strong market positioning and robust footprint.

In first-quarter fiscal 2025, Gap brand registered net sales growth of 5% year over year to $724 million while comparable sales increased 5%, highlighting the sixth straight quarter of positive comps. The company’s brand-reinvigoration efforts aided the performance. We note that the brand generated its eighth straight quarter of higher market share. This momentum is likely to continue and boost the company’s overall results. 

Our model expects the Gap Global brand to post sales growth of 2.4% year over year in the fiscal second quarter and 2.7% in fiscal 2025. For fiscal 2025, management projects sales to grow 1-2% compared with the last fiscal year. Our model estimates sales growth of 1.5% year over year for fiscal 2025.

In a nutshell, Gap is focused on its strategic priorities, such as driving financial and operational rigor, reinvigorating the brands, reinforcing its operating platform and fostering a more energized culture. GAP’s integrated digital and in-store experiences are strengthening its omnichannel edge, further positioning it for sustained, long-term growth.

GAP’s Competition

Abercrombie & Fitch Co. ANF, American Eagle Outfitters, Inc. AEO and Urban Outfitters, Inc. URBN are the major companies that compete with Gap.

Abercrombie has been progressing smoothly on its strategy by brand repositioning, consumer-led innovation, global expansion and accelerated digital transformation. ANF is focused on disciplined inventory management, boosting margins and reinforcing brand loyalty through a seamless omnichannel experience. The company has been seeing exceptional growth for the Hollister brand, which posted a remarkable 22% increase in net sales in first-quarter fiscal 2025, marking the eighth consecutive quarter of growth. This growth was well-balanced across genders and key product categories, including fleece, jeans and skirts, highlighting the brand’s sustained appeal among the teen audience. 

American Eagle is experiencing sturdy momentum in its Aerie brand, thanks to its growing appeal, market relevance and deep brand resonance. The company is focused on building brand awareness and expanding into new categories. Solid momentum and market share growth in OFFL/NE Activewear are Aerie’s most promising key growth drivers, with strength seen in leggings, sports bras, fleece and shorts. American Eagle continues to build brand equity and widen awareness with popular franchises like Real Me, apart from introducing more performance-driven styles.

Urban Outfitters has been elevating its brands by prioritizing trend-forward assortments, sturdy retail experiences and a strong connection to youth culture. Curating distinctive store experiences, engaging dynamically on social media and launching exclusive collaborations, the brand offers cultural relevance and deep resonance with the audience. Urban Outfitters’ Free People brand delivers robust results, with first-quarter fiscal 2026 total sales growing 11%, driven by a 3.1% retail segment comp and a remarkable 25.6% increase in wholesale revenues. URBN's rental business, Nuuly, continues to serve as a high-growth engine for it.

GAP’s Price Performance, Valuation and Estimates

Shares of Gap have lost 10.4% year to date compared with the industry’s decline of 15.6%.

From a valuation standpoint, GAP trades at a forward price-to-earnings ratio of 9.15X compared with the industry’s average of 17.32X.

The Zacks Consensus Estimate for GAP’s fiscal 2025 and fiscal 2026 EPS indicates year-over-year growth of 0.5% and 5.9%, respectively. The company’s EPS estimate for both the fiscal years has gone south in the past 30 days.

GAP stock currently carries a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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