(Reuters) -Gap beat Wall Street expectations for third-quarter comparable sales on Thursday, helped by strong marketing-driven demand for its Old Navy and Banana Republic brand apparel despite economic uncertainty.
Shares of the company rose nearly 4% in extended trading.
The apparel maker has banked on efforts such as introducing limited-edition products in collaboration with Disney, Netflix's "Stranger Things", and Universal's "Wicked".
This has helped attract customers at a time when consumer spending
in the U.S. has been pressured by persistent inflation and the Trump administration's volatile trade policies.
The retailer had also launched initiatives such as "Better in Denim" featuring global girl group Katseye, alongside campaigns such as "Feels Like Gap" and "Get Loose with Troye Sivan", which helped boost brand relevance among Gen Z.
The brand has also been preparing to launch an affordable beauty and personal care line this fall in a bid to diversify beyond apparel.
Gap reiterated its forecast for a tariff impact on its annual operating margin between 100 and 110 basis points. The company sources less than 10% of its merchandise from China as of 2024, while that from Mexico and Canada together is less than 1%.
CEO Richard Dickson had said in May the company expects reliance on China to be less than 3% exiting 2025.
For the quarter ended November 1, Gap's comparable sales rose 5%, beating expectations of 3.26% growth, according to data compiled by LSEG.
Comparable sales for Old Navy and namesake Gap brands rose 6% and 7% each, and grew 4% for Banana Republic.
Meanwhile, comparable sales for Athleta, Gap's athleisure brand, fell 11%, marking its fourth consecutive quarter of decline. It has been narrowing its assortment to focus on items in demand such as women's activewear to turn around the business.
Gap's quarterly revenue rose 3% to $3.94 billion, narrowly surpassing expectations of $3.91 billion.
(Reporting by Neil J Kanatt and Sanskriti Shekhar in Bengaluru; Editing by Leroy Leo)
