Gap stock is falling, and it’s because of women’s dresses

Gap (GAP) had a good quarter — except for those dresses over at the Old Navy division.

Shares of the retail icon tanked 15% in premarket trading on Friday as the company slashed its full-year sales outlook amid style challenges in dresses at its Old Navy division in the first quarter. Those challenges have persisted into the second quarter.

“We just got off to a weak start in dresses,” Gap CEO Richard Dickson acknowledged on a late Thursday earnings call. “We just did not have the right fashion and value equation [for dresses].”

The miss on dresses overshadowed another standout performance for the namesake Gap division, which posted a 10% same-store sales increase on the back of interest in denim and fleece. Banana Republic also continued its turnaround, with a 2% same-store sales gain compared with an unchanged result a year earlier.

“While CEO Dickson has implemented a foundation of improved merchandising & marketing across all four brands, we see a mixed portfolio of results, with Gap brand outsized strength offset by Athleta ongoing challenges, in addition to mixed recent performance at Old Navy,” JPMorgan analyst Matt Boss wrote in a note today.

The Gap bull downgraded his rating on the stock to Neutral from Overweight.

NEW YORK, NEW YORK - MARCH 05: People walk by a Gap store in Times Square on March 05, 2026 in New York City. The Gap, Inc., a global clothing retailer, is set to release its fourth-quarter earnings results after the closing bell on Thursday, March 5. (Photo by Spencer Platt/Getty Images) — People walk by a Gap store in Times Square on March 5, 2026, in New York City. (Spencer Platt/Getty Images) · Spencer Platt via Getty Images

Earnings analysis

Net sales: +2% year over year to $3.5 billion, vs. $3.52 billion estimate
Diluted earnings per share: $0.38 vs. $0.37 estimate

What else caught our attention

Full-year sales guidance cut: Sales expected to grow between 1% and 2%, down from a prior range of between 2% and 3%.
But full-year profit outlook raised: The company raised its profit guidance and now expects adjusted earnings per share of $2.30 to $2.40, up from a prior range of $2.20 to $2.35.
Eyes on this division: The turnaround at the athletic apparel brand Athleta continues to be nonexistent in the results. Same-store sales dropped 11% compared to an 8% decline last year.

Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

Click here for in-depth analysis of the latest stock market news and events moving stock prices

Read the latest financial and business news from Yahoo Finance

Source link