Gap (GAP) earnings Q4 2024

Gap on Thursday posted another quarter that blew away expectations, indicating its turnaround under CEO Richard Dickson is working better – and faster – than Wall Street anticipated. 

Shares jumped 17% in extended trading Thursday.

The apparel retailer behind Old Navy, Banana Republic, Athleta and its namesake banner beat expectations on the top and bottom lines during the all-important holiday quarter and saw comparable sales grow 3%, ahead of expectations of up 1%, according to StreetAccount.  

Here’s how Gap did in its fiscal fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 54 cents vs. 37 cents expected
• Revenue: $4.15 billion vs. $4.07 billion expected

The company’s reported net income for the three-month period that ended Feb. 1 was $206 million, or 54 cents per share, compared with $185 million, or 49 cents per share, a year earlier. 

Sales dropped to $4.15 billion, down about 3% from $4.30 billion a year earlier. Like other retailers, Gap benefited from an extra selling week in the year-ago period, which negatively skewed comparisons.

In the year ahead, Gap is expecting sales to grow between 1% and 2%, in line with expectations of up 1.7%, according to LSEG. For the current quarter, its guidance was slightly weaker than anticipated. It’s expecting sales to be “flat to up slightly,” compared to Wall Street estimates of up 1.5%, according to LSEG. 

“We’ve been operating in a highly dynamic backdrop for the last few years, and we’re expecting the same for fiscal 2025,” said Gap’s finance chief Katrina O’Connell on a call with analysts. “As a result, we’ve taken a balanced view with our guidance and remain focused on controlling the controllables.”

Like other retailers caught in the midst of President Donald Trump’s trade war with China, Canada and Mexico, Gap has been working to figure out the impact new duties will have on the company. In an interview with CNBC, Dickson said less than 1% of its product comes from Canada and Mexico, combined, and less than 10% comes from China.

When asked if the company will raise prices, Dickson said the “goal is to minimize the impact to the consumer.”

“We’re going to be working with our suppliers. We’re looking at our cost base, and we’ll need to balance that with always protecting the structural economics of the business,” said Dickson.

O’Connell added tariffs, as they stood on Thursday, were embedded into the company’s guidance and said any impact to margin is expected to be “relatively minimal.”

It’s been about a year and a half since Dickson took over as Gap’s CEO. Under his direction, the company has gotten back to growth and repaired its brand image — and in fiscal 2024, delivered its highest gross margin in more than 20 years at 41.3%. 

The former…