Gap Shares Fall Despite Strong Q1 Results

Gap Inc. reported first-quarter net sales growth of 2.2% to $3.46 billion and earnings per share of $0.51, surpassing analyst expectations. Growth was fueled by comparable sales gains at Old Navy (3%) and Gap (5%), while Banana Republic and Athleta continued to underperform. The company warned that ongoing U.S. tariffs could increase costs by $250 million to $300 million this year, with mitigation efforts expected to limit the reduction in operating income to $100 million to $150 million. Gap is diversifying its supply chain, aiming to reduce China sourcing to under 10% and ensuring no single country accounts for more than 25% of sourcing by 2026. The company does not expect to pass significant tariff-related price increases onto consumers for now, despite differing from some competitors. Despite strong results, shares fell sharply after the earnings release due to investor concerns over tariff impacts.