March 5 (Reuters) - Gap forecast annual adjusted profit largely below Wall Street estimates on Thursday, as tariffs weigh on the apparel makers' margins and consumers turn increasingly picky about their non-essential spending in the United States.
Shares of the company fell 8.3% in extended trading. The stock gained 8% in 2025.
The Old Navy parent expects a 200 basis point impact from U.S. import tariffs on its current-quarter gross margins.
Gap sources about 46% of its products from Southeast Asian
countries such as Vietnam and Indonesia, which were hit by the duties last year, according to its 2024 annual report.
Tariffs have weighed on apparel companies' margins and plans for the year, with the recent Supreme Court decision to strike down some tariffs imposed by U.S. President Donald Trump further adding to the uncertainty.
Gap expects annual adjusted earnings of about $2.20 to $2.35 per share, largely below analysts' average estimate of $2.32, according to data compiled by LSEG.
Rivals American Eagle and Abercrombie & Fitch, as well as shoemaker Steve Madden, have also flagged tariff pressures.
Gap's holiday-quarter same-store sales rose 3%, falling short of estimates of a 3.08% rise, as shoppers, particularly in lower-income households, sought discounts and deferred non-essential spending.
The company, like its peers, has been investing heavily in advertising to attract shoppers. Its capital expenditure is expected to be about $650 million for the full year, compared with $470 million reported in 2025.
It forecast fiscal 2026 net sales to grow between 2% and 3%, in-line with estimates of a 2.45% increase.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Shinjini Ganguli)
