TLDR
- GAP stock surged 11% after reporting Q2 EPS of $0.52, beating the $0.48 Wall Street estimate
- Revenue came in at $3.65 billion, slightly below the $3.69 billion consensus forecast
- Old Navy, which drives nearly 60% of Gap’s revenue, saw sales fall 4% year-over-year in Q2
- Gap named Michael Francis as the new Old Navy CEO, replacing Haio Barbeito effective November 2
- UBS raised its price target on GAP to $42 from $40, maintaining a Buy rating
Gap reported Q2 earnings per share of $0.52, topping Wall Street’s estimate of $0.48. Revenue for the quarter came in at $3.65 billion, just below the $3.69 billion analysts had forecast. The stock jumped 11% on the news.
The earnings beat came alongside a leadership shake-up at Old Navy. Michael Francis, currently the brand’s chief customer officer, will take over as CEO from Haio Barbeito on November 2. Barbeito has been in the role since 2022.
Old Navy posted Q2 sales of $2.1 billion, down 4% year-over-year. Comparable sales also fell 4%, worse than the 2.4% decline Wall Street had penciled in. A year ago, the brand was posting 2% comparable sales growth.
$GAP Q2’26 EARNINGS HIGHLIGHTS
🔹 Revenue: $3.7B (Est. $3.69B) 🟡; -2% YoY
🔹 Adj. EPS: $0.52 (Est. $0.48) 🟢
🔹 Adj. Gross Margin: 41.4%; +20 bps YoY
🔹 Gap Comp Sales: +10% YoYRaises FY Guide:
🔹 Adj. EPS: ~$2.35-$2.45 (Est. $2.34) 🟢
🔹 CapEx: ~$650M (Est. $641M) 🟡
🔹…— Wall St Engine (@wallstengine) August 27, 2026
With Old Navy accounting for nearly 60% of Gap’s total revenue, the underperformance has been a recurring headache for the company. The CEO change is a direct response to that pressure.
Gap Narrows Full-Year Outlook
Gap’s overall comparable sales fell 1% in the quarter, including a 3% drop in in-store sales. The company tightened its full-year sales growth forecast from a range of 1% to 2% down to 1% to 1.5%, citing the continued weakness at Old Navy.
On the brighter side, Gap raised its full-year EPS guidance to a range of $2.35 to $2.45.
The company said it received $95 million in tariff refunds during the quarter and used that money to cut prices on some clothing items. The rest of the tariff refund is expected to land in Q3.
UBS Lifts Price Target
UBS raised its price target on GAP to $42 from $40 and kept its Buy rating. The firm expects EPS growth of 23% in fiscal year 2027, up from 12% in 2026 and negative 3% in 2025.
UBS believes that improvement could push Gap’s price-to-earnings ratio from 8 times to 13 times. The stock currently trades at a P/E of around 8.5.
The firm pointed to Gap’s expanding beauty and handbag businesses as growth drivers. It also noted that the company’s stock buyback program has been running ahead of expectations.
UBS acknowledged Old Navy’s first-half 2026 comparable sales performance was disappointing but expects Gap to work through the issues in the next six months.
Gap stock holds a consensus Moderate Buy rating from 15 analysts, based on seven Buys and eight Holds over the last three months. The average price target of $26.36 implies around 27% upside from recent levels.
UBS sees a favorable risk-reward setup for the stock at current prices.
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