Gap delivered higher sales across most brands in the third quarter of fiscal 2025 and has raised its full-year guidance.
The US-based retailer posted net sales of $3.9bn, up 3% year-on-year and comparable sales rose 5%.
Store sales increased 3% and online sales grew 2%, accounting for 40% of total net sales.
Gap ended the quarter with 3,500 stores worldwide, including 2,497 company-operated locations.
Gross margin slipped 30 basis points to 42.4%, as merchandise margin fell 70 basis points due to a 190-basis-point tariff impact, though higher average unit retail supported underlying performance.
Operating income reached $334m, an 8.5% margin, while net income totalled $236m.
Diluted earnings per share during the three months under review stood at $0.62.
The company closed the quarter with $2.5bn in cash, cash equivalents and short-term investments up 13% year-on-year.
Year-to-date operating cash flow was $607m, with free cash flow at $280m. Inventory rose 5% to $2.5bn, largely reflecting higher tariff-related costs.
Capital expenditure for the period was $327m.
Gap paid a third-quarter dividend of $0.165 per share and approved the same amount for the fourth quarter.
Among the group’s brands, Old Navy delivered net sales of $2.3bn, up 5%, with comparable sales rising 6%.
The Gap brand reported a 6% increase in net sales to $951m and a 7% rise in comparable sales.
Banana Republic’s net sales fell 1% to $464m, though comparable sales rose 4%.
Athleta posted an 11% decline in both net sales and comparable sales to $257m.
Gap now expects full-year net sales growth of 1.7% to 2%, raising guidance to the top end of its previous range.
It forecasts an operating margin of 7.2%, including a 100 to 110 basis point tariff impact.
Capital expenditure is unchanged at $500m to $550m, and the retailer anticipates around 35 net store closures in 2025.
Gap president and CEO Richard Dickson stated: “We are proud to report that Gap Inc’s third quarter results exceeded our net sales and margin expectations and delivered the seventh consecutive quarter of positive comparable sales.
“Our strategy is working and our brands are gaining momentum with our three largest brands - Old Navy, Gap and Banana Republic - each posting strong comparable sales. The strength of our third quarter and quarter-to-date performance positions us well for the holiday selling season and gives us the confidence to increase our full year net sales outlook to the high end of our prior guidance range and raise our full year operating margin outlook.”
