GAP INC recently released its 10-Q report for the quarter ended August 1, 2026. The Gap, Inc. is an apparel retail company that sells clothing, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. Its business spans company-operated stores, franchise stores, websites, and third-party arrangements across the United States, Canada, Japan, Taiwan, and international markets, with franchise agreements extending into Asia, Australia, Europe, Latin America, and the Middle East.
In Item 2, Management’s Discussion and Analysis, the company said second-quarter fiscal 2026 net sales fell 2% from a year earlier, while gross profit rose to $1.93 billion from $1.54 billion and gross margin expanded to 52.8% from 41.2%. Operating income increased to $676 million from $292 million, net income rose to $501 million from $216 million, and diluted earnings per share climbed to $1.38 from $0.57. The company said the quarter included about $417 million of net IEEPA tariff recoveries, including roughly $512 million of tariff refunds partly offset by a $95 million commitment of appreciation for certain vendors.
Comparable sales for the quarter were down 1% overall, with Old Navy Global down 4%, Gap Global up 10%, Banana Republic Global up 3%, and Athleta Global down 12%. For the first half of fiscal 2026, comparable sales were flat overall, with Old Navy Global down 1%, Gap Global up 10%, Banana Republic Global up 2%, and Athleta Global down 11%.
At the end of the quarter, GAP operated 2,471 company-owned stores, down from 2,486 a year earlier. By brand, the company had 1,241 Old Navy North America stores, 461 Gap North America stores, 127 Gap Asia stores, 349 Banana Republic North America stores, 42 Banana Republic Asia stores, and 251 Athleta North America stores. Franchise partners operated about 1,000 stores.
Net sales for the first half of fiscal 2026 declined $40 million, or 1%, from the prior year. Cost of goods sold and occupancy expenses fell to 47.2% of net sales in the quarter from 58.8% a year earlier, and to 53.2% from 58.5% in the first half, driven largely by the tariff recoveries. Operating expenses rose $9 million in the quarter to $1.253 billion, but dropped $207 million in the first half to $2.225 billion, helped by a $313 million credit card interchange fee litigation settlement gain, net of legal fees, partly offset by a $50 million charitable contribution and strategic investment costs.
Income tax expense was $179 million in the quarter, up from $80 million a year earlier, while the effective tax rate edged down to 26.3% from 27.0%. For the first half, the effective tax rate was 25.7%, compared with 26.8% last year.
As of August 1, 2026, GAP reported $2.10 billion in cash and cash equivalents and $382 million in short-term investments. It had no borrowings under its ABL facility at quarter-end. As a result of these announcements, the company's shares have moved 15.42% on the market, and are now trading at a price of $23.995. If you want to know more, read the company's complete 10-Q report here.
