Executive Summary

Gap Inc. delivered a solid holiday quarter: net sales $4.15B (-3% YoY due to 53rd-week calendar shift), comps +3%, gross margin 38.9% (flat YoY), operating margin 6.2%, and diluted EPS $0.54; FY24 gross margin reached 41.3% and operating income $1.1B, with strong cash generation and $2.6B year-end liquidity .
Management guided FY25 to modest top-line growth (+1% to +2%) with slight gross margin expansion and SG&A leverage, driving 8%–10% operating income growth; Q1 FY25 outlook: sales flat to slightly up, with slight GM and SG&A leverage .
Strategic momentum: Old Navy and Gap continued market share gains; Athleta remained uneven (Q4 comps -2%); dividend raised 10% in February and the company repurchased 3M shares (~$75M) in Q4 .
Estimates context: Management stated results exceeded financial expectations, but SPGI consensus estimates were not retrievable at time of analysis; we will update vs-consensus once S&P Global data access returns .

What Went Well and What Went Wrong

What Went Well

Brand momentum and share gains: Q4 comps +3% at the company level; Old Navy +3%, Gap +7%, Banana Republic +4%; “All four brands gained market share in the year,” with Gap “back in the cultural conversation” and Old Navy gaining in active and denim .
Margin discipline and operating leverage: Q4 SG&A of ~$1.35B leveraged 130 bps YoY; Q4 operating margin expanded 120 bps YoY to 6.2%; full-year operating margin 7.4% (highest since 2018) .
Capital allocation and balance sheet: Year-end cash, cash equivalents and short-term investments of $2.6B; free cash flow $1.04B; dividend increased 10% for Q1 FY25; resumed buybacks (3M shares for ~$75M in Q4) .

Quotes

“Gap is back in the cultural conversation.” – CEO Richard Dickson .
“We achieved one of the highest gross margins in the last 20 years.” – CEO Richard Dickson .
“We see a clear path towards delivering 8% to 10% operating income growth in fiscal 2025.” – CFO Katrina O’Connell .

What Went Wrong

Athleta underperformed in peak holiday: Q4 comps -2%, missing internal expectations; management expects choppy near-term performance as the reset continues .
Top-line optics impacted by calendar: Q4 net sales -3% YoY (approx. 7-pt negative from the 53rd-week shift and loss of a week), masking underlying comp strength .
Tariff and FX headwinds ahead: FY25 outlook embeds tariff/FX pressure (less than 10% sourced from China, ~30 bps full-year FX headwind, and Q1 ~50 bps FX headwind); management targeting cost savings of ~$150M to offset inflation and reinvest in growth .

Financial Results

Consolidated P&L vs Prior Year and Prior Quarter (GAAP)

Metric	Q4 FY2023 (14w)	Q3 FY2024	Q4 FY2024 (13w)
Net Sales ($B)	$4.298	$3.829	$4.149
YoY Net Sales Change	—	+2%	-3% (approx. -7 pts calendar)
Gross Margin	—	42.7%	38.9%
Operating Income ($M)	$214	$355	$259
Operating Margin	—	9.3%	6.2%
Net Income ($M)	$185	$274	$206
Diluted EPS ($)	$0.49	$0.72	$0.54
Comparable Sales	—	+1%	+3%
Online Sales Mix	—	40%	41%

Notes: Q4 FY2024 includes calendar impacts from loss of the 53rd week; comps are measured against comparable 13/52-week periods .

Segment Net Sales by Brand and Geography (Q4)

Brand	Q4 FY2023 ($M)	Q4 FY2024 ($M)	YoY %	Q4 Comp
Old Navy Total	2,288	2,212	-3%	+3%
Gap Total	1,007	980	-3%	+7%
Banana Republic Total	567	545	-4%	+4%
Athleta Total	419	396	-5%	-2%
Other	17	16	—	—

Geographic detail for Q4 FY2024: U.S. $3,679M; Canada $298M; Other regions $172M .

KPIs and Balance Sheet/Cash Flow

KPI	Q4 FY2024	Commentary
Online Sales Mix	41% of sales	+100 bps vs Q3 mix
Effective Tax Rate	24.3%	In line with full-year ETR 25.8%
Inventory (EOY)	$2.1B, +3.6% YoY	Increase tied to timing of in-transit
Cash, CE & STI (EOY)	$2.6B	+38% YoY; strong liquidity
Free Cash Flow (FY)	$1.039B	Non-GAAP; CFO emphasizes cash discipline
Capex (FY)	$447M	FY25 plan higher (see guidance)

Vs. Wall Street Estimates

S&P Global consensus (revenue, EPS) was not retrievable at time of analysis due to access limits; we will update the “vs. estimates” section when data access is restored. Management indicated Q4 “exceeded financial expectations” .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales Growth	FY25	N/A	+1% to +2%	New
Operating Income Growth	FY25	N/A	+8% to +10%	New
Gross Margin	FY25	N/A	Expand slightly YoY	New
SG&A	FY25	N/A	Leverage slightly YoY; ~$150M savings	New
Net Interest Income	FY25	N/A	~+$15M	New
Effective Tax Rate	FY25	N/A	~26%	New
Capex	FY25	N/A	~$600M	New
Net Store Closures (company-operated)	FY25	N/A	~35	New
Net Sales	Q1 FY25	N/A	Flat to up slightly	New
Gross Margin	Q1 FY25	N/A	Expand slightly vs 41.2%	New
Operating Expense (% sales)	Q1 FY25	N/A	Leverage slightly YoY	New

Dividend: Board authorized Q1 FY25 dividend of $0.165/share (+10% vs Q4 FY24) on Feb 25, 2025 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2)	Previous Mentions (Q-1, Q3 FY2024)	Current Period (Q4)	Trend
AI/Technology	N/A (doc not available)	Inv. in tech; supply chain resilience; digital-first mindset; groundwork for platform	Office of AI stood up; plan to develop monetization (consumer experience, product-to-market, productivity) in 2025	Increasing focus and roadmap clarity
Supply Chain & Inventory	N/A	Navigated port strike, disruptions; diversified sourcing; China <10%	Continued agility; inventory managed with healthy stock-to-sales; China <10%; FX/tariffs contemplated	Stable execution; headwinds embedded in guide
Tariffs/Macro/FX	N/A	Macro dynamic backdrop; FX/tariffs considered implicitly	FY25 includes small margin impact from tariffs; ~30 bps FY FX headwind; Q1 ~50 bps FX headwind	Cautious, well-flagged
Product/Brand Performance	N/A	Gap momentum (denim, collaborations, CashSoft); Old Navy strength in active/denim; Athleta return to growth	Gap comps +7%; Old Navy +3%; Banana +4%; Athleta -2% (holiday softness)	Broad momentum except Athleta
Channel Mix/Omni	N/A	Online +7% (Q3); ~40% mix; omnichannel focus	Online 41% mix in Q4; continued omni emphasis	Stable to improving mix
Capital Allocation	N/A	Dividends maintained; strong cash; evaluating buybacks	Dividend +10% Q1; buyback $75M in Q4; $~400M auth. remaining	More shareholder return

Management Commentary

Strategic progress and brand relevance: “We continued to perform while we transform... delivering another quarter that exceeded financial expectations… executing our brand reinvigoration playbook… and strengthening our platform” – CEO Richard Dickson .
Gap brand resurgence: “Gap is back in the cultural conversation… comps accelerated to 7%… seventh consecutive quarter of market share gains” – CEO Richard Dickson .
Margin/earnings algorithm: “Gross margin of 38.9% was flat YoY… SG&A leveraged 130 bps… operating margin 6.2%… EPS $0.54, up 10% YoY” – CFO Katrina O’Connell .
FY25 framework: “Approx. 1% to 2% net sales growth, slight gross margin expansion and SG&A leverage… 8% to 10% operating income growth… net interest income ~$15M… tax rate ~26%” – CFO .
Athleta reset: “We will be strengthening our product and ensuring newness to excite our core… near term may result in choppy quarterly performance” – CEO .

Q&A Highlights

SG&A productivity and reinvestment: ~$150M cost savings across technology, marketing, overhead, and stores in FY25 with targeted reinvestment (personalization, design enablement, supply chain modernization, employee productivity) .
Athleta strategy: Maintaining #3 rank in women’s active; holiday underperformance addressed via product depth/newness; reset continues with near-term variability .
Capital allocation: Board lifted Q1 dividend 10%; repurchased $75M in Q4; ~$400M remaining authorization; capex stepping up to ~$600M in FY25 to fund organic growth .
Consumer trends: Growth across income cohorts; share gains among lower-income via Old Navy; Gap strength in middle/high-income cohorts; portfolio breadth cited as advantage .
Tariffs/FX embedded: Less than 10% China sourcing; FX/tariff impacts included in FY25 and Q1 views .

Estimates Context

S&P Global consensus estimates for Q4 FY2024 (revenue, EPS, EBITDA) could not be retrieved due to access limits at time of analysis; management stated Q4 exceeded financial expectations. We will refresh and quantify beat/miss vs SPGI consensus once system access resumes .

Key Takeaways for Investors

Underlying demand and brand relevance remain constructive (comps +3%; Gap +7%, Old Navy +3% in Q4) with ongoing share gains; holiday softness was concentrated at Athleta and calendar effects masked reported sales .
Margin structure is resilient: FY24 GM 41.3% and Q4 GM 38.9%; FY25 guide calls for slight GM expansion and SG&A leverage despite tariff/FX headwinds .
FY25 algorithm implies modest revenue growth but healthy EBIT dollar expansion (+8–10%), consistent with disciplined cost actions (~$150M) and targeted reinvestment (AI, consumer experience, design) .
Capital returns are re-accelerating: 10% dividend lift and resumed buybacks in Q4; strong $2.6B liquidity supports higher FY25 capex to fund growth .
Watch Athleta’s product cadence and core-customer engagement as a key swing factor for FY25 comps/mix; management expects uneven quarters near term .
External headwinds (tariffs/FX) are embedded in guidance; sourcing diversification (China <10%) and cost discipline should mitigate impact .

Appendix: Additional Context

Prior Quarter (Q3 FY2024): Net sales $3.83B (+2% YoY), GM 42.7%, OM 9.3%, EPS $0.72; raised FY24 outlook at that time .
Dividend action: Board authorized $0.165/share Q1 FY25 dividend (+10% QoQ) on Feb 25, 2025 .

Sources: Gap Inc. Q4 FY2024 press release and Form 8-K (Item 2.02 & EX-99.1), earnings call transcript (Mar 6, 2025), Q3 FY2024 materials, and Feb 25, 2025 dividend release .

GAP INC (GAP)·Q4 2025 Earnings Summary