Aug 27 (Reuters) - Apparel retailer Gap raised its annual profit forecast on Thursday, betting on sustained momentum at its namesake brand even as pressure at some of its other labels persists.
The company, three years into CEO Richard Dickson's tenure, has been trying to reinvigorate demand after years of inconsistent sales. Merchandise focused on current trends and expanded marketing campaigns have helped boost relevance, even as consumers remain selective with discretionary spending.
Gap's turnaround
efforts have been supported by strong demand at its namesake brand, which posted a 10% comparable sales increase in the second quarter, extending its streak of positive performance to 10 consecutive quarters.
Analysts, on average, expected a rise of 8.8%, according to data compiled by LSEG.
Comparable sales at Old Navy fell 4% for the quarter, compared with a 2% increase last year, while Athleta's comparable sales fell 12% after a 9% decline last year.
"We have work to do at Old Navy, but we have a clear understanding of the factors that impacted performance and are taking targeted actions that are already driving improved results," Dickson said.
Gap raised its adjusted annual earnings per share by 5 cents at both ends to a range of $2.35 to $2.45. The forecast excludes tariff refunds of $95 million and related interest income of $5 million for the reported quarter, as well as a potential boost from those in the current quarter, Gap said.
The company now expects fiscal 2026 sales growth of 1% to 1.5%, versus its prior forecast of 1% to 2%. Analysts estimate a 1.1% rise.
Gap said the outlook reflects a balanced approach that considers consumer trends and the broader economic and geopolitical environment, while recognizing risks related to energy prices and U.S. tariffs.
Revenue for the second quarter ended August 1 fell 2% to $3.65 billion, narrowly missing analysts' estimate of about $3.69 billion, while adjusted profit of 52 cents per share beat expectations of 48 cents.
(Reporting by Neil J Kanatt in Bengaluru and Danielle Kaye in New York; Editing by Leroy Leo)
