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Investing.com -- Gap on reported Thursday second-quarter revenue that just missed analysts’ forecasts amid weakness in its Athleta brand. The apparel retailer also flagged a hit from U.S. tariffs.
Gap Inc (NYSE:GAP) shares fell more than 2% premarket trade Friday.
Gap announced earnings per share of $0.57 on revenue of $3.725B. Analysts polled by Investing.com anticipated EPS of $0.55 on revenue of $3.73B.
The company’s athleisure brand Athleta, saw comparable sales fall 9%. Old Navy, Gap, and Banana Republic brands reported positive comps for the quarter.
The company also said it had begun to see "some impact from higher tariffs imposed on product imported into the United States," it added.
Gap reported lower gross margins for the quarter, declining 130 basis points year-over-year to 41.2%, missing the 41.9% consensus.
"FQ2 sales/EPS were ~in-line with consensus despite a gross margin shortfall but, as anticipated, higher S.E. Asia tariff rates are adding further pressure to the outlook," Baird analyst Mark R. Altschwager said in a post-earnings note.
However, the analyst thinks that the risk-reward profile for the stock is now "looking more favorable in the low $20s, given early progress on tariff mitigation and a more de-risked earnings outlook."
Jefferies analysts voiced similar remarks, noting they see "a more balanced risk/reward near term."
For Q3, the retailer forecast net sales growth estimate in a range of 1.5% to 2.5%, which included the impact of tariffs.
For fiscal 2025, GAP said it continues to expects net sales growth in range of 1% to 2%.
(Yasin Ebrahim contributed to this report.)