Gap Shares Fall 10% on $175M Tariff Warning
The apparel retailer's stock plunged after it raised its tariff impact forecast, overshadowing a strong quarterly earnings report.
Gap Inc. (NYSE: GPS) shares fell sharply by about 10% in pre-market trading after the company warned that new trade policies could significantly impact its bottom line. The negative outlook overshadowed a first-quarter report that otherwise beat analyst expectations, creating a mixed picture for investors.
The apparel giant announced it was for the fiscal year to between $150 million and $175 million. This news immediately soured investor sentiment, with the profit warning taking center stage over a strong quarterly performance that saw the retailer post a net profit of $216 million, or $0.57 per share, on $3.73 billion in revenue, surpassing market forecasts.
Despite the stock's sharp decline, some analysts believe the market's reaction is exaggerated. JPMorgan analyst Matt Boss argued the sell-off presents a compelling buying opportunity, noting that the market is overlooking the company's fundamental strengths. He emphasized that tariffs are not a new challenge for retailers and that Gap has been proactive in mitigating this specific risk. "Gap will exit this year with only 3% of its sourcing coming from China," , down from 20% in 2019.
Gap's management expressed confidence in its ability to navigate the trade headwinds, citing its scale, brand strength, and supply chain adjustments as key levers to offset the increased costs. The company is maintaining its full-year sales growth forecast of 1% to 2%, driven by strong performance at its Old Navy and core Gap brands. While the tariff warning has introduced significant uncertainty, Wall Street's consensus remains an , suggesting that the retailer's long-term recovery story may still be intact.