Gap is making a comeback.
The brand reported 5% same-store sales growth for its fiscal first quarter of 2025. Its the sixth consecutive quarter of same-store sales growth.
Gap was one of the most popular retail names of the 1980s and 1990s, but fell out of favor among consumers at the start of the new millennium. From fiscal 2001 to 2021, the brand closed about 2,000 stores and annual sales fell by about $3.5 billion.
Despite multiple turnaround attempts from a revolving door of CEOs, the company couldn’t sustain momentum.
“They would have a couple quarters where things looked like they were doing well. They would over buy the inventory, then they would promote it. Then promoting kills the brand equity,” said Barclays senior retail analyst Adrienne Yih. “The brands weren’t strong enough to drive full price selling, so they were always on promo.”
In 2023, CEO Richard Dickson took the helm of Gap, which owns its namesake banner, Old Navy, Banana Republic and Athleta. Dickson came from toymaker Mattel where he is largely credited for the revival of the Barbie brand. One of Dickson’s first moves at the apparel retailer was hiring fashion designer Zac Posen as the company’s creative director.
Posen has helped to put Gap back into the cultural conversation by dressing celebrities like Demi Moore, Timothée Chalamet, Anne Hathaway and Laura Harrier for splashy red carpet events. However, Posen’s main focus is on the Old Navy brand where he serves as chief creative officer.
Re-energizing Old Navy is important because it accounts for more than half of Gap’s revenue. In fiscal 2024, Gap grew overall sales by 1%, driven mostly by growth at Old Navy. While that may seem nominal, its underlying business is more profitable.
“They are growing that 1% on the highest gross margins that they have had in the past 20 years. When you finally do grow sales, you want to grow it in an extraordinarily high profit generating and healthy manner,” said Yih.
In order to get back to growth, Gap had to shrink first. The company closed hundreds of stores over the past decade and laid off thousands of employees in 2023 as it worked to clean up its balance sheet.
“We had unprofitable stores, unprofitable markets, where we did store closures. We moved international businesses to partners, joint ventures,” said Gap brand president and CEO Mark Breitbard. “We consolidated our SKUs, we rationalized styles, improved quality dramatically. So all of those things, including some things like reducing costs, which are key to making a business healthy but not fun. Those were setting up a foundation for us to layer on a creative renaissance, really, for the brand.”
Still, there’s more work to be done. Banana Republic and Athleta are not seeing the same consistency in same-store sales growth as Gap and Old Navy. While smaller brands, together they accounted for more than 20% of company-wide net sales in fiscal 2024.
Plus, uncertainty surrounding U.S. tariff policies has created a challenging retail landscape. Despite beating Wall Street’s earnings expectations for its fiscal first-quarter report, Gap saw its stock fall 15% on news that tariffs, if they remain in place as is, would cost the company between $100 million and $150 million.
Watch the video to find out if the Gap renaissance is here to stay.
