Q2 2026 The Gap, Inc. Earnings Call Transcript
Key Points
- Gap brand delivered another exceptional quarter with comparable sales increasing 10%, marking its 11th consecutive quarter of positive comps and gaining market share.
- Banana Republic continued to build momentum, posting its fifth consecutive quarter of positive comparable sales growth with broad-based strength across men's and women's categories.
- Gross margin strength was driven by disciplined pricing and inventory management, with adjusted gross margin up 20 basis points year-over-year and merchandise margin expanding 80 basis points.
- The company raised its full-year adjusted operating margin and EPS outlook, with EPS expected to grow 10% to 15% year-over-year, reflecting improved profitability and share repurchases.
- Strong balance sheet and capital allocation: repurchased over $600 million in shares year-to-date, driving mid-single-digit EPS accretion, while maintaining a healthy dividend and investing in growth initiatives like beauty and accessories.
- Old Navy underperformed with comparable sales declining 4%, impacted by a challenged women's summer seasonal assortment and a slowdown in traffic, leading to a modest miss versus expectations.
- Athleta's top line remained pressured with comparable sales declining 12%, and the company expects full-year trends to remain similar to the first half, limiting near-term growth.
- Net sales declined 2% in the second quarter, with mixed performance across the portfolio, and the company narrowed its full-year revenue outlook to 1% to 1.5% growth.
- SG&A deleveraged 90 basis points in the quarter due to timing of investments in growth accelerators and capabilities, pressuring operating margin.
- ROD (rent and occupancy depreciation) deleveraged 60 basis points, with expectations for continued deleverage in the third quarter, reflecting higher depreciation from increased capital investments and store openings.
Good afternoon, ladies and gentlemen. I would like to welcome everyone to the Gap Inc. second quarter 2026 earnings conference call. (Operator Instructions) I would now like to introduce your host, Shirley Martin, Senior Director of Investor Relations.
Good afternoon, everyone. Welcome to Gap Inc.'s second quarter fiscal 2026 earnings conference call. Before we begin, I'd like to remind you that the information made available on this conference call contains forward-looking statements that are subject to risks that could cause our actual results to be materially different.
For information on factors that could cause our actual results to differ materially from any forward-looking statements, please refer to the cautionary statements contained in our latest earnings release. The risk factors described in the company's annual report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2026, and other filings with the Securities and Exchange Commission all of
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