Gap Inc (NYSE: GAP) was struggling with sales declines, profitability concerns, and loss of cultural relevance amidst an ever-increasing competition in the retail market up until the first half of 2023.
Then it named Richard Dickson its chief executive, hoping the market veteran could revitalise its brands just as he did with Barbie at Mattel.
And the clothing and accessories retailer’s Q4 results last night suggest it was the right decision to onboard Dickson as he’s seeing incredible success in turning around Gap.
Gap earned 54 cents a share in its recently concluded quarter – up significantly versus 36 cents per share that analysts had forecast.
Gap saw market share gains across all four brands
Gap currently owns three notable names other than its namesake brand: Athleta, Banana Republic, and Old Navy.
Its shares are being rewarded this morning (up 18% in premarket) as all of those brands “gained market share against a backdrop of a declining apparel industry,” chief executive Richard Dickson revealed in an interview on Friday.
Plus, the New York listed firm saw an uptick across all income cohorts as well, with lower income groups contributing the most to overall market share gains in Q4.
Despite today’s rally, Gap stock is down some 7.0% versus its year-to-date high in late January.
Gap chief executive downplays tariffs impact
Speaking with Jim Cramer, the company’s chief executive also downplayed the potential impact of higher tariffs the Trump administration has announced on Canada, Mexico, and China.
The apparel and accessories retailer relies on China for nearly 10% of its products while it sources less than 1.0% of the assortments from Canada and Mexico combined.
Richard Dickson also confirmed that Gap will continue to diversify its supply chain to further minimise the effect of tariffs on its customers.
“We’re going to be working hard to continue the momentum that we have. Tariffs cost inputs, these are all the day-to-day of doing business,” he added.
Gap stock rallies on upbeat future guidance
Investors are cheering Gap’s quarterly report also because its management offered upbeat full year guidance despite the broader concerns of higher tariffs.
The company based out of San Francisco, California, now sees its sales climbing as much as 2.0% this year. Analysts, in comparison, had called for the revenue to remain flat in 2025.
“The brand campaigns and collaborations are attracting a new generation to Gap while reinforcing the brand to those who loved us for years,” said CEO Dickson in the earnings release.
Wall Street seems to share his optimism on what the future holds for Gap shares, considering the consensus rating currently sits at “overweight”.
Analysts see upside in the retail stock to nearly $29 on average, which indicates potential for more than 20% upside on top of today’s gains.
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