Gap Inc. (GAP) Q2 2025 Financial Results Summary

# Gap Inc. (GAP) Q2 2025 Financial Results Summary

**Release Date:** August 28, 2025

Gap Inc. (NYSE: GAP), the largest specialty apparel company in the U.S., reported its second quarter financial results for the fiscal year 2025, ending August 2, 2025. Below is a summary of key financial metrics and updates from the report:

### Financial Highlights

– **Net Sales:**
– Reported net sales of **$3.7 billion**, remaining flat compared to the same quarter last year.

– **Comparable Sales:**
– Achieved a **1%** increase in comparable sales year-over-year, marking the sixth consecutive quarter of positive comparisons.

– **Store Sales:**
– Store sales saw a **1%** decrease compared to the previous year.
– The company operated approximately **3,500 store locations** in over 35 countries by the end of the quarter, with **2,486 company-operated stores.**

– **Online Sales:**
– Experienced an increase in online sales of **3%** year-over-year, representing **34%** of total net sales.

– **Gross Margin:**
– Reported a gross margin of **41.2%**, which is a decrease of **140 basis points** from the previous year.

– **Merchandise Margin:**
– Merchandise margin decreased by **150 basis points** year-over-year, primarily due to a revenue-sharing agreement’s favorable effects last year.

– **Rent, Occupancy, and Depreciation (ROD):**
– As a percentage of sales, ROD leveraged by **10 basis points** compared to last year.

– **Operating Expenses:**
– Total operating expenses amounted to **$1.2 billion**.

– **Operating Income:**
– Operating income stood at **$292 million**, with an operating margin of **7.8%**.

– **Effective Tax Rate:**
– The effective tax rate was **27.0%**.

– **Net Income:**
– Achieved net income of **$216 million**.
– Diluted earnings per share were reported at **$0.57**, a **6%** increase compared to the same quarter last year.

### Balance Sheet and Cash Flow Highlights

– **Cash and Investments:**
– Ended the quarter with cash, cash equivalents, and short-term investments totaling **$2.4 billion**, an increase of **13%** from the prior year.

– **Net Cash from Operating Activities:**
– Reported net cash from operating activities of **$308 million**.

– **Free Cash Flow:**
– Free cash flow was **$127 million**, derived from operating activities after capital expenditures.

– **Ending Inventory:**
– Ending inventory was reported at **$2.3 billion**, reflecting a **9%** increase year-over-year due to accelerated receipts and higher costs from tariffs.

– **Capital Expenditures:**
– Capital expenditures totaled **$181 million**.

– **Shareholder Returns:**
– Returned **$144 million** to shareholders in the second quarter, including:
– **Dividends:** Declared a second quarter dividend of **$0.165 per share** totaling **$62 million**.
– **Share Repurchases:** Repurchased **3 million shares** for **$82 million**, reducing the number of shares outstanding to **371 million**.

### Global Brand Performance

– **Old Navy:**
– Net sales of **$2.2 billion**, up **1%**, with comparable sales increasing by **2%**.

– **Gap:**
– Net sales of **$772 million**, also increasing by **1%**, with comparable sales rising by **4%**.

– **Banana Republic:**
– Reported net sales of **$475 million**, down **1%**, but with comparable sales up **4%**.

– **Athleta:**
– Net sales decreased to **$300 million**, reflecting an **11%** decline, with comparable sales down **9%**.

### Outlook

– **Fiscal 2025 Outlook:**
– For the full year, the company anticipates net sales growth of **1% to 2%**, with an operating margin projected between **6.7% and 7.0%**. This includes an expected **100-110 basis points** impact from tariffs.

– **Third Quarter Expectations:**
– Net sales are projected to grow by **1.5% to 2.5%** relative to Q3 2024 results of **$3.8 billion**.

This summary encapsulates Gap Inc.’s financial performance and strategic outlook for the second quarter of fiscal year 2025.

### CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Amount in millions

### CONDENSED CONSOLIDATED BALANCE SHEETS
Amount in millions