EXEC: Athleta’s Q4 Comps Slide 10 Percent, Continued Declines Expected in First Half

Gap, Inc. reported that same-store sales at its Athleta banner declined 10 percent in the fourth quarter and 9 percent for the year. Gap officials on an analyst call said they expect Athleta to show negative mid- to high-single-digit sales declines in the first half of the current year.

Net sales in the quarter were $354 million, down 11 percent year over year. Athleta’s full-year net sales of $1.2 billion were down 10 percent versus last year. Athleta operated 252 stores at the close of its fiscal year, down from 260 at the start of the year.

On the analyst call, Gap Inc. CEO Richard Dickson said Athleta “remains a work in progress” under the direction of Maggie Gauger, who replaced  Chris Blakeslee as Athleta president and CEO, in August 2025. Previously, Gauger served as the head of Nike’s North America Women’s business.

“The active category remains strategically important and resilient. Even amid disruption, customers continue to make fashion choices that are active-oriented. Within that landscape, Athleta holds a meaningful position as the number-five women’s active brand, with distinction as a women’s-only brand rooted in quality, performance, and design intent exclusively for her. And while Athleta sales trend has been disappointing, we have accumulated critical learnings and are acting on them with intention. We are re-architecting the assortment, building key items into enduring franchises, and reorganizing the brand around consumer insights.”

He added, “Maggie is going deep with the team, even meeting with Athleta’s founder, to reconnect the brand to its original purpose and establish clarity and alignment around the brand’s identity. With the strength of our portfolio and our proven playbook, 2026 will be about positioning the brand for sustainable growth in the years ahead. Progress will take time, but I am confident we are attracting the right talent to rebuild Athleta.”

Companywide, Gap’s earnings per share came in at 45 cents, missing analysts’ consensus estimate of 46 cents. Revenue of $4.24 billion was in line with targets.

Fourth Quarter Fiscal 2025 | Financial Results

• Net sales of $4.2 billion were up 2 percent compared to last year.
  • Store sales were flat, while online sales increased 5 percent year-over-year.
  • Online sales represented 42 percent of total net sales.
  • Comparable sales were up 3 percent.
• Gross margin of 38.1 percent declined 80 basis points versus last year.
  • Merchandise margin declined 90 basis points versus last year’s primarily due to an estimated net tariff impact of approximately 200 basis points. Average unit retail increased due to lower discounting.
  • Rent, occupancy and depreciation (ROD) as a percent of sales leveraged 10 basis points versus last year.
• Operating expense was $1.4 billion.
• Operating income was $229 million, with an operating margin of 5.4 percent.
• The effective tax rate was 27.5 percent.
• Net income of $171 million; diluted earnings per share of $0.45.

 Full Year Fiscal 2025 | Financial Results

• Net sales of $15.4 billion were up 2 percent compared to last year.
  • Store sales were up 1 percent compared to last year. The company ended the year with nearly 3,500 store locations in about 35 countries, of which 2,474 were company operated.
  • Online sales increased 4 percent year over year and accounted for 39 percent of total net sales.
  • Comparable sales were up 3 percent.
• Gross margin of 40.8 percent declined 50 basis points versus last year.
  • Merchandise margin declined 80 basis points versus last year, primarily due to an estimated net tariff impact of approximately 120 basis points.
  • Rent, occupancy, and depreciation (ROD) as a percent of sales leveraged 30 basis points versus last year.
• Operating expense was $5.2 billion.
• Operating income was $1.1 billion, with an operating margin of 7.3 percent.
• The effective tax rate was 27.9 percent.
• Net income was $816 million; diluted earnings per share were $2.13.

 Balance Sheet and Cash Flow Highlights

• Ended the year with cash, cash equivalents and short-term investments of $3.0 billion, an increase of $414 million from the prior year.
• Fiscal 2025 net cash from operating activities was $1.3 billion. Free cash flow, defined as net cash from operating activities less purchases of property and equipment, was $823 million for the year.
• Ending inventory of $2.2 billion was up 7 percent from last year, primarily due to higher costs from tariffs.
• Fiscal year 2025 capital expenditures were $470 million.
• Paid a fourth-quarter dividend of $0.165 per share, totaling $62 million.
  • The company’s Board of Directors approved a first-quarter fiscal year 2026 dividend of $0.175 per share, representing an approximate 6 percent increase from the fourth-quarter fiscal year 2025 dividend per share.
• Repurchased 7 million shares for $155 million during fiscal year 2025, ending the year with 372 million shares outstanding.
  • Underscoring Gap, Inc.’s continued commitment to returning cash to shareholders, the company today, March 5, announced that its Board of Directors approved a new $1 billion share repurchase authorization for its common stock, superseding the company’s existing authorization dated February 26, 2019.
• Returned $402 million of cash to shareholders in the form of dividends and share repurchases during fiscal year 2025.

Fourth Quarter and Full Year Fiscal 2025 | Global Brand Results
Among its other banners, Old Navy’s fourth-quarter net sales of $2.3 billion were up 3 percent compared to last year. Comparable sales were up 3 percent. The brand’s price-value equation is resonating with consumers as Old Navy continues to win with strategic categories and across a wide range of income levels. Full-year net sales of $8.7 billion were up 3 percent versus last year. Comparable sales were up 3 percent.

Gap’s fourth-quarter net sales of $1.1 billion were up 8 percent compared to last year. Comparable sales were up 7 percent. Gap is demonstrating the momentum it’s gaining as it continues to expand its customer base across generations. Full-year net sales of $3.5 billion were up 5 percent versus last year. Comparable sales were up 6 percent.

Banana Republic’s fourth-quarter net sales of $549 million were up 1 percent compared to last year. Comparable sales were up 4 percent. The brand delivered its third consecutive quarter of comp growth, reflecting progress in product elevation and sharper marketing and merchandising. Full-year net sales of $1.9 billion were down one percent versus last year. Comparable sales were up 3 percent.

Fiscal 2026 Outlook
The fiscal 2026 full-year and first-quarter outlook provided below is based on tariff rates in effect prior to February 20, 2026. Separately, the company is expecting a net gain of $313 million in the first quarter of 2026 related to a legal settlement and is concurrently pledging to make a charitable donation of $50 million to a combination of the Gap Foundation and our donor-advised fund.

Including the net benefit of both the gain and donation, the company expects full-year reported diluted earnings per share to be approximately $2.71 to $2.86, reported operating expense leverage, and reported operating margin expansion. For the first quarter, the company expects reported operating expense leverage.

All fiscal 2026 outlook measures provided below exclude the impact of these items.

Image and Charts courtesy Gap, Inc./Athleta