Gap Faces Up to $300M Tariff Impact, Shares Fall 17%

Gap Inc. reported a strong first quarter with a 2.2% increase in revenue and earnings per share exceeding expectations, driven by strong demand for Old Navy and its flagship brand. Despite this positive performance, the company faces significant challenges from President Trump's tariffs on imports, which are expected to cost Gap between $250 million and $300 million in 2025, with the company having strategies to mitigate more than half of these costs. Gap's CEO, Richard Dickson, emphasized that the company does not plan significant price increases due to tariffs, contrasting with other retailers who have raised prices selectively. The tariff uncertainty has caused investor concern, leading to a sharp decline in Gap's share price despite maintaining its full-year sales and operating income growth forecast, which currently does not reflect tariff impacts. Gap has reduced its reliance on China to less than 3% of its sourcing by diversifying its supply chain, helping to offset some tariff risks. Overall, while Gap shows resilience and a strong brand portfolio, tariff-related costs pose a notable risk to its profit margins and investor sentiment.