Gap's namesake brand just notched its 11th consecutive quarter of comparable-sales growth, a streak that would have seemed unthinkable a few years ago, when the once-iconic retailer looked like another casualty of fast fashion and corporate drift.
The San Francisco-based company reported a 10 percent jump in comparable sales at its flagship Gap brand in the latest quarter, beating analyst expectations and sending Gap Inc. shares up 15 percent. The results cap a turnaround led by CEO Richard Dickson, who arrived in August 2023 from Mattel, where he helped revive the Barbie brand.
But the good news stops at the Gap label. The parent company's overall revenue fell 2 percent to roughly $3.65 billion. Old Navy, Gap Inc.'s biggest brand by sales, saw comparable sales drop 4 percent, dragged down by weakness in dresses, shorts, and swimwear. Athleta fared worse, with comparable sales plunging 12 percent. Only Banana Republic joined the namesake brand in positive territory, posting a modest 3 percent gain.
Dickson's playbook has centered on three pillars: product, storytelling, and cultural relevance. The company has pursued high-profile collaborations with Victoria Beckham and Hailey Bieber, and completed a second collection with sportswear label Malbon. Creative chief Zac Posen has pushed the brand into high-fashion territory, with Gap saying his designs have appeared at major red-carpet events including the Met Gala and the Oscars.
It is a deliberate echo of the brand's golden era. In the 1990s, Gap commercials featured Madonna, Missy Elliott, and other stars who made khakis and white T-shirts feel like cultural currency. Sharon Stone wore a $26 Gap mock turtleneck to the 1996 Academy Awards, pairing it with a designer skirt and jacket, a move that landed the brand squarely in the national conversation.
That decade belonged to Gap. Under then-CEO Mickey Drexler, who took the helm in 1995, the company became a retail juggernaut. Old Navy, launched in 1994, hit $1 billion in annual sales within four years, reportedly the fastest any retailer had reached that milestone at the time.
Then the momentum died. Sales weakened in the early 2000s. Drexler was forced out. The brand spent years struggling to make basics feel exciting while fast-fashion competitors undercut it on price and speed.
Dickson acknowledged the problem in his largest brand. Newsmax reported that the CEO said the company has "work to do at Old Navy" but has "a clear understanding of the factors that impacted performance and are taking targeted actions that are already driving improved results." Gap Inc. also raised its adjusted annual earnings-per-share forecast to a range of $2.35 to $2.45, up five cents at both ends, a sign that management sees the flagship brand's strength carrying the broader company forward.
The imbalance is not new for Gap Inc. The company has historically leaned on whichever brand happened to be hot. A 2017 quarter illustrated the mirror image of today's situation: Old Navy posted an 8 percent comparable-sales jump that surprised analysts, while the Gap brand and Banana Republic lagged. Neil Saunders, managing director of GlobalData Retail, warned at the time that "this imbalance means that Gap is firing on just one cylinder."
That single-cylinder problem persists. Old Navy's 4 percent decline and Athleta's 12 percent drop mean the parent company's revenue shrank even as the namesake brand surged. Gap Inc. appointed retail veteran Michael Francis as Old Navy's new president and CEO, replacing Haio Barbeito, in a leadership change aimed at reversing the slide.
Gap's origin story is the kind of American entrepreneurial tale that resonates with anyone who has built something from scratch. Don Fisher, frustrated that he couldn't find jeans that fit, opened a store with his wife Doris in 1969 at 1950 Ocean Avenue in San Francisco. The shop sold Levi's jeans, records, and tapes. The Gap label followed.
Growth came fast. By 1972, the company operated 25 stores. It went public in 1976, acquired Banana Republic in 1983, introduced its colorful pocket tee shirt in 1984, and opened its first international locations in London in 1987. By the mid-1990s, Gap was not just a retailer, it was a cultural fixture.
Today, Gap Inc. operates nearly 3,500 stores across roughly 35 countries. The scale is massive, but scale alone has never been the company's problem. The challenge has always been relevance, whether a brand built on basics can stay interesting enough to compete with trendier, faster competitors.
The broader retail environment has punished companies that rely too heavily on discounting to move product. The Washington Examiner reported on an earlier period when Gap Inc.'s fourth-quarter profit dropped 12.5 percent due to heavy holiday discounting, with then-CEO Glenn Murphy acknowledging the company needed to "be innovative and creative and bring reasons for people to engage in our brands... that are not rooted in promotions and discounts."
Dickson appears to have absorbed that lesson. Rather than competing on markdowns, his strategy leans on celebrity cachet and design credibility, the same formula that worked under Drexler three decades ago. Whether the approach can lift the rest of the portfolio, particularly Old Navy and Athleta, remains the open question.
Eleven consecutive quarters of growth at the namesake brand is a genuine achievement. A 15 percent share-price pop after earnings shows Wall Street is paying attention. But a company whose overall revenue is shrinking while one brand carries the load is not out of the woods. Gap Inc. has been here before, riding one hot brand while the others drift, and the history of what happened next is not encouraging.
Turnarounds built on celebrity partnerships and cultural buzz can work, but they have to eventually reach the cash register at every brand in the portfolio. Right now, the Gap label is doing the heavy lifting, and the rest of the company needs to earn its keep.
