Gap Faces Pressure: Can Old Navy & Gap Brands Offset Athleta's Reset?

Gap Inc. GAP is facing pressure as Athleta remains in the midst of a prolonged reset, raising the question of whether strength at Old Navy and Gap brands can offset this drag. In third-quarter fiscal 2025, Athleta’s net sales declined 11% year over year, with comparable sales (comps) also down 11%, reflecting ongoing challenges as management undertakes a deliberate reinvigoration of the brand. While leadership changes and structural resets are underway, management acknowledged that Athleta’s recovery will take time, limiting its near-term contribution to consolidated growth.However, Old Navy and Gap delivered standout performances, demonstrating the resilience of the company’s portfolio. Old Navy posted a 6% increase in comps, supported by strong demand in denim, activewear and kids categories, alongside consistent market share gains. The brand’s value proposition and trend-right assortments continue to resonate across income cohorts, even amid macroeconomic pressure. The Gap brand also maintained solid momentum, reporting a 7% comps increase, its eighth consecutive quarter of positive comparable sales, fueled by successful denim-led campaigns and growing engagement with younger consumers.Banana Republic further contributed to stability, delivering 4% comps growth as its brand repositioning gains traction. Management highlighted that the three largest brands helped drive the company’s highest quarterly comps growth in more than four years, offsetting Athleta’s weakness to a meaningful extent. While Athleta remains a near-term headwind, sustained execution at Old Navy and Gap positions the company to navigate the reset and preserve overall momentum.GAP’s Price Performance, Valuation & EstimatesShares of this Zacks Rank #1 (Strong Buy) company have gained 23.1% in the past six months compared with the industry’s growth of 13.5%.Image Source: Zacks Investment ResearchFrom a valuation standpoint, GAP trades at a forward price-to-earnings ratio of 12.52X compared with the industry’s average of 16.88X.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for GAP’s fiscal 2025 and 2026 EPS indicates a year-over-year decline of 2.73% and 6.5%, respectively. The company’s EPS estimate for both fiscal years has remained stable in the past 30 days.Image Source: Zacks Investment ResearchOther Stocks to ConsiderSome other top-ranked stocks are FIGS Inc. FIGS, American Eagle Outfitters Inc. AEO and Stitch Fix, Inc. SFIX.FIGS is a direct-to-consumer healthcare apparel and lifestyle brand. It flaunts a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for FIGS’ current financial-year earnings and sales suggests growth of 450% and 7%, respectively, from the year-ago actuals. FIGS delivered a trailing four-quarter average earnings surprise of 87.5%.American Eagle is a specialty retailer of casual apparel, accessories and footwear. It sports a Zacks Rank of 1 at present.The Zacks Consensus Estimate for American Eagle's current fiscal-year earnings implies a decline of 23.6%, while the same for sales suggests growth of 2.4% from the year-ago actuals. AEO delivered a trailing four-quarter average earnings surprise of 35.1%.Stitch Fix engages in the provision of clothing and accessories in the United States, and currently carries a Zacks Rank of 2 (Buy). SFIX delivered an average earnings surprise of 37.7% in the last four quarters.The Zacks Consensus Estimate for Stitch Fix’s current financial-year sales and EPS indicates a growth of 6.4% and 9.1%, respectively, from the year-ago figure.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report The Gap, Inc. (GAP): Free Stock Analysis Report Stitch Fix, Inc. (SFIX): Free Stock Analysis Report FIGS, Inc. (FIGS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks