Gap's Athleta brand sales continue to fall, and that's sinking the retailer's stock

By Claudia Assis

The smallest of Gap's brands continues to be a flash point for investors, while the Old Navy and namesake brands see sales rise

Old Navy and Gap stores in New York City. Sales at Athleta, Gap's smallest brand, continued to lag.

Gap shares were selling off in early Friday trading, after sales at Athleta, its smallest brand by revenue and least successful, lagged and the retailer's outlook for the year failed to excite investors.

Executives sought to reassure Wall Street that Gap's (GAP) turnaround efforts are taking root, however, pointing at the company's eighth-straight quarter of same-store sales growth.

"Our aspirations remain high and our teams are energized as we continue to drive toward becoming a high-performing house of iconic American brands that delivers long-term value for our shareholders," CEO Richard Dickson said in a statement late Thursday.

But the stock sank 8.1% toward a four-month low in premarket trading on Friday. That puts the stock on track to have its worst day since it plunged 20.2% on May 30, 2025.

Thursday's results were "decent," analysts at Jefferies said in a note, adding they are looking forward to hearing more about turnaround plans for Athleta, Gap's athleisure brand, and also about the company's foray into beauty products, which started in the fall, calling it "a new frontier for growth."

Gap reported fiscal fourth-quarter sales of $4.23 billion, up 2% from the year-ago period and meeting FactSet consensus.

Overall, store sales were flat but online sales rose 5% year on year to comprise 42% of total net sales, the company said.

Same-store sales were up 3%, also in line with analysts' expectations. That included 7% and 3% same-store growth for the Gap and Old Navy brands, respectively, and also a 10% drop in comparable-store sales at Athleta.

"We remain focused on rebuilding the brand for the long term," Gap said.

The company said it earned an adjusted 45 cents a share in the quarter, just under Wall Street's forecast of 46 cents a share.

Inventories edged 7% higher to $2.2 billion at the end of the fiscal year, mostly because of higher cost due to tariffs, Gap said.

The company guided for fiscal 2026 sales between 2% and 3% higher than 2025 sales of $15.4 billion, and adjusted earnings per share of about $2.20 to $2.35, which would compare with last year's $2.13 a share. At the midpoint, that outlook is lower than the $2.32 a share expected by analysts.

Friday's selloff comes after Gap shares have gained 40% so far this year through Thursday, compared with gains of 19% for the S&P 500 index SPX in the same period.

-Claudia Assis

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03-06-26 0732ET