Gap Reports Margin Growth and Cash Surge
(NYSE: GPS) reported second quarter fiscal 2025 (period ending Jan. 31, 2026) results on July 29, 2025, highlighting comparable sales growth of 1% year over year and operating margin of 7.8%. Old Navy, Gap, and Banana Republic all posted positive comparable sales, but Athleta experienced a double-digit sales decline, with notable strength in inventory discipline and cost management offsetting new tariff headwinds. Gap updated its fiscal 2025 operating margin guidance to 6.7%-7%, explicitly absorbing $150 million to $175 million in incremental annualized tariff costs in fiscal 2025 while maintaining its 1%-2% net sales growth expectations for fiscal 2025.
Operating margin came in at 7.8%, down 10 basis points compared to last year despite a 140 basis point gross margin contraction, attributed mostly to credit card benefit lapping and inventory actions at Athleta. Cash, cash equivalents, and short-term investments climbed 13% year over year to $2.4 billion, reflecting the highest cash levels in 15 years as of fiscal 2024 (period ending Jan. 31, 2025), and supporting $144 million in shareholder returns during the period.
This margin resilience and capital build bolster Gap's ability to absorb external shocks, fund growth initiatives, and drive long-term shareholder return irrespective of transitory macro or segment pressures.
Source Fool.com
