Gap Inc (GAP) Stock Forecast & Price Target

Gap demonstrated a positive financial performance in its latest report, achieving a 3.0% year-over-year sales growth to $3.942 billion, which exceeded the consensus estimate. The company also maintained a strong liquidity position, ending the third quarter with $2.5 billion in cash and short-term investments, reflecting a 13% increase compared to the previous year. Continued improvements in brand performance, evidenced by sales and gross margin gains, along with a 3% rise in comparable sales, highlight the firm's successful recovery strategies in a challenging retail environment.

Gap's financial outlook remains negative due to a decline in gross margin, which fell approximately 30 basis points to 42.4%, contrary to the company's expectations of a 150-170 basis point decrease. Additionally, comparable sales for the third quarter dropped by 11% year-over-year, compounding the 5% growth from the previous year and following a 9% decline in the prior quarter. The company's gross margin is now projected to decline by 50 basis points year-over-year, attributed to ongoing tariff pressures and a significant contraction in merchandise margins, further underscoring persistent financial challenges.