Dive Brief:
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With one less week over the holidays compared to 2023, Gap Inc. Q4 net sales fell 3.5% year over year to $4.1 billion, as comps rose 3%. Store sales fell 4%, and e-commerce, 41% of total net sales, fell 2%.
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By brand: Old Navy Q4 net sales fell 3% to $2.2 billion, with comps up 3%; Gap fell 3% to $980 million, with comps up 7%; Banana Republic fell 4% to $545 million, with comps up 4%; and Athleta fell 5% to $396 million, with comps down 2%.
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Gross margin was flat compared to last year at 38.9%, with merchandise margin expanding 20 basis points. Net income surged more than 11% to $206 million.
Dive Insight:
Old Navy and — in a surprise to many — Gap helped Gap Inc. blow past analysts’ expectations for the holiday quarter. CEO Richard Dickson on Thursday said the company grabbed market share for the eighth straight quarter, with gains at three of its four brands.
“Gap is back in the cultural conversation. This brand was built on strong product narratives with brilliant marketing, expressed through big ideas, and over the past year, each of these were reignited,” Dickson said. “The team has been executing the brand reinvigoration playbook with excellence and it's showing up in the results.”
Old Navy regained strength in the quarter, too, though it may have its limits. Growth had slowed in recent years, undermining a goal to reach $10 billion in sales; in 2024 the discount brand reached $8.4 billion, up 2% year over year, with comparable sales up 3%. Dickson said the company continues to “believe there is significant growth potential ahead for the brand,” but didn’t reiterate that lofty goal. In fact, the brand, though it remains an apparel juggernaut, “may have just hit its own revenue ceiling,” according to BMO Capital Markets analysts led by Simeon Siegel.
Executives acknowledged Athleta’s weakness, though Dickson said the athleisure brand maintained its market share. Chris Blakeslee, who arrived from Alo Yoga in 2023, leads the turnaround there.
“We have a positive view on the leadership of that business but it will take more time than we thought,” Evercore ISI analysts led by Michael Binetti said in a Friday research note.
Banana Republic, apparently still looking for new leadership after the abrupt departure last year of brand CEO Sandra Stangl, has made “a lot of progress” and “is positioned well for continued progress in 2025 and beyond,” Dickson said. But its footprint is about to shrink: This fiscal year the company expects to close about 35 stores, mostly Banana Republic locations, according to Chief Financial Officer Katrina O'Connell.
Last year in North America, Gap Inc. opened a net six Old Navy stores, and closed a net 19 Gap stores, 20 Banana Republic stores and 10 Athleta stores.
