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Gap (GAP) stock is plunging in after-hours trading as investors focus on the retailer's expected tariff hit rather than its first quarter earnings beat.
The company's revenue was $3.46 billion, compared to the $3.42 billion expected, while earnings per share (EPS) came in at $0.51, better than the $0.45 analysts estimated.
The retailer said it expects the tariff impact to cost up to $150 million in its 2025 operating income and $250–300 million in its gross estimated incremental cost. Gap maintained its full-year outlook but noted that this guidance doesn't reflect potential tariff impacts.
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Let's get to some more earnings now. Gap first quarter earnings coming in, the shares taking a large hit of 17%. It looks like that may have to do with some commentary around tariffs. Our Brooke DePalma is here with us now to give us more details.
Yeah, in the press release the company said that their fiscal 2025 outlook does not reflect the potential effect of tariffs. That's far different than what we've been hearing from so many other companies, including Best Buy just this morning that said that now their full year guidance includes the impact of tariffs. Very specifically, they said if these tariff rates remain, they could result in a gross estimated incremental cost of approximately $250 million to $300 million, certainly not what Wall Street wants to hear here. And this was despite the company beating earnings, beating revenue, beating same store sales growth. I also want to note that within their two key brands, Old Navy as well as Gap, they beat same store sales growth expectations from Wall Street, but Banana Republic and Athleta missed expectations there. Athleta has been a brand that the company has been struggling to really reinvigorate though. That brand within Gap saw same store sales decline of 8% compared to the roughly 3% that Wall Street had expected. Another interesting point that I saw was that the company ended the quarter with inventory up 7%. We've heard so much about this. Did companies pull forward? This shows that they did. They said that they ended the inventory up $2.1 billion, was up 7% compared to last year, primarily resulting from earlier timing of receipts here. So certainly Wall Street not pleased with this report and not pleased with that, the fact that 2025 outlook does not reflect the impact of tariffs.
All right, thank you, Brooke. Appreciate it.
