By Brian Sozzi  

Gap shares surge on fourth quarter earning estimates / Yahoo finance

Gap (GAP) may be the lone retailer this spring to stand up to the dual headwinds of a tariff-wielding president and a prickly Mother Nature.

The company on Thursday bucked the trend of ugly retailer earnings this week, beating profit estimates and signaling a respectable year ahead. Gap's full-year outlook was generally in line with consensus forecasts despite tariff impacts in the key sourcing region of China.

"We're all dealing with tariffs. We're monitoring the developments of tariffs on an hourly basis. We source less than 10% of our product from China and less than 1% of our product comes from Canada and Mexico combined. So our guidance contemplates what we know today regarding the tariff policy," Gap CEO Richard Dickson told me on Yahoo Finance.

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Gap shares popped 17% in after-hours trading.

"Huge [earnings print]," one source that covers Gap told me by email.

The company appears to be benefiting from a sticky turnaround at the Gap division, led by improved marketing campaigns. Styles have also improved under noted designer Zac Posen, who was appointed executive vice president and creative director of Gap and chief creative officer of Old Navy in February 2024.

Old Navy looks to be getting its house in order as it follows a similar playbook to Gap.

The aforementioned efforts to diversify production out of China in recent years are also helping the brand spin a better narrative relative to others in retail.

"Core Gap seems to be breaking away into a higher trajectory on better product/marketing, we think that Old Navy will repeat its history of significant acceleration as weather turns, and we believe Athleta will also accelerate as transitory income statement headwinds roll off and brand CEO Chris Blakeslee (formerly at Alo) shows the brand turnaround he's been building to for 18 months," said Evercore analyst Michael Binetti.

"Within a few months, Gap could be one of the more encouraging same-store sales acceleration stories in softline retail with multiple brands in the portfolio contributing to positive EPS revisions."