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GAP INC — Interim / Quarterly Report 2026
May 29, 2026
30743_ir_2026-05-29_81ff8009-dd48-4c4e-a012-e1ce6818d10f.zip
Interim / Quarterly Report
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 2, 2026
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7562
THE GAP, INC .
(Exact name of registrant as specified in its charter)
| Delaware | 94-1697231 |
|---|---|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Two Folsom Street
San Francisco , California 94105
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: ( 415 ) 427-0100
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.05 par value | GAP | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ |
|---|---|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The number of shares of the registrant’s common stock outstanding as of May 22, 2026 was 359,978,933 .
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “project,” and similar expressions also identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the following:
• considering the impact of changes in U.S. trade policy and tariffs on the assumptions and estimates used when preparing our financial information;
• the impact of recent accounting pronouncements;
• the timing of revenue recognition of upfront payments related to our credit card program agreement;
• the timing of recognition in income of unrealized gains and losses from designated cash flow hedges;
• the impact of losses due to indemnification obligations on the Condensed Consolidated Financial Statements;
• the outcome of proceedings, lawsuits, disputes, and claims, including the impact of such actions on the Condensed Consolidated Financial Statements and our financial results;
• our arrangements with third parties to operate stores and websites selling apparel and related products under our brand names;
• delivering financial and operational rigor, through an optimized cost structure and disciplined execution;
• building our brands to increase relevance, while we elevate our product and customer experience to drive sustainable growth;
• optimizing our platform to drive scale by advancing capabilities that amplify and enable our brands;
• strengthening our culture by developing talent and fostering a high-performance environment;
• continuing to integrate sustainability into business practices to support long-term growth;
• the impact of higher tariff rates on our gross margins in future quarters;
• continuing to monitor macroeconomic conditions and the impact of the current U.S. trade policy and higher tariff rates;
• evaluating and pursuing mitigating actions;
• the impact of macroeconomic factors on consumer behavior and continued uncertainty related to the macroeconomic environment;
• our ability to supplement near-term liquidity, if necessary, with our ABL Facility (as defined below) or other available market instruments;
• the impact of the seasonality of our operations, in addition to the impact of macroeconomic factors, on certain asset and liability accounts and cash inflows and outflows;
• the ability of our current balances of cash, cash equivalents, and short-term investments, along with our cash flows from operations, our ABL Facility, and other available market instruments to support our future business operations and liquidity requirements;
• the importance of our sustained ability to generate free cash flow, which is a non-GAAP financial measure and is defined and discussed in more detail in Part I, Item 2 of this Form 10-Q below;
• our dividend policy, including the potential timing and amounts of future dividends; and
• the impact of changes in internal control over financial reporting.
Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following risks, any of which could have an adverse effect on our business, financial condition, results of operations, or reputation:
• the overall global economic and geopolitical environment, uncertainties related to government fiscal, monetary, trade, and tax policies, and consumer spending patterns;
• recent changes in U.S. trade policy and tariffs and the risk of potential future changes or worsening trade tensions between the United States and other countries, including potentially elevated fuel costs;
• the risk that trade matters, including tariffs on goods imported from our sourcing countries, could further increase our costs, or reduce the supply of apparel available to us;
• the risk that our enterprise risk management efforts will not be successful in mitigating the negative impact of tariffs and we may not be able to recover tariff refunds that may be owed;
• the risk that our investments in customer, digital, omni-channel, and other strategic initiatives, including beauty, may not deliver the results we anticipate;
• the highly competitive nature of our business in the United States and internationally;
• the risk that we or our franchisees may be unsuccessful in gauging apparel trends and changing consumer preferences or responding with sufficient lead time;
• the risk that we may be unable to manage our inventory and fulfillment operations effectively and the resulting impact on our sales and results of operations;
• the risk that we fail to maintain, enhance and protect our brand image and reputation;
• the risk that failures of, or updates or changes to, our digital and information technology systems, including our continued integration of data science and artificial intelligence, may disrupt our operations;
• the risk that we do not successfully implement our marketing efforts, or that our talent partnerships expose us to reputational or other risks;
• the risk that we fail to manage key executive succession and retention and to continue to attract qualified personnel;
• the risks to our business, including our costs and global supply chain, associated with global sourcing and manufacturing;
• the risks of U.S. or foreign labor strikes, work stoppages, boycotts, port congestion, and other disruptions to our sourcing operations;
• the risk that our technology systems that support our e-commerce platform may not be effective or function properly;
• the risks to our reputation or operations associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct;
• the risk that we or our franchisees may be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying, or terminating leases for existing store locations effectively;
• the risk that our franchisees and licensees could impair the value of our brands;
• the risk that our efforts to expand internationally may not be successful;
• engaging in or seeking to engage in strategic transactions that are subject to various risks and uncertainties;
• the risk of loss or theft of assets, including inventory shortage;
• the risk of information security breaches or vulnerabilities that may result in increased costs, violations of law, significant legal and financial exposure, and a loss of confidence in our security measures;
• reductions in income and cash flow from our credit card programs;
• the risk of foreign currency exchange rate fluctuations;
• the risk that our comparable sales and margins may experience fluctuations or that we may fail to meet financial market expectations;
• the risk that our level of indebtedness may impact our ability to operate and expand our business;
• the risk that we and our subsidiaries may be unable to meet our obligations under our indebtedness agreements;
• the risk that covenants in our indebtedness agreements may restrict or limit our business;
• the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital markets;
• evolving regulations and expectations with respect to environmental, social, and governance matters, and increased scrutiny of diversity, equity, and inclusion initiatives;
• the adverse impacts of climate change on our business;
• natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events;
• our failure to comply with applicable laws and regulations and changes in the regulatory or administrative landscape;
• the risk that we will not be successful in defending various proceedings, lawsuits, disputes, and claims;
• the risk that the assumptions and estimates used when preparing the Condensed Consolidated Financial Statements, including estimates and assumptions regarding inventory valuation, income taxes and valuation allowances, sales return and bad debt allowances, deferred revenue, and the impairment of long-lived assets, are inaccurate or may change, and the resulting impact on our results of operations;
• the risk that changes in the geographic mix and level of income or losses, the expected or actual outcome of audits, changes in deferred tax valuation allowances, and new legislation could impact our effective tax rate, or that we may be required to pay amounts in excess of established tax liabilities; and
• the risk that the adoption of new accounting pronouncements will impact future results.
Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026 and our other filings with the U.S. Securities and Exchange Commission.
Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of May 29, 2026. We assume no obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
We suggest that this document be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
WHERE YOU CAN FIND MORE INFORMATION
Investors and others should note that Gap Inc. announces material financial and operational information to its investors using its Investor Relations website, press releases, SEC filings, and public conference calls and webcasts. Gap Inc. and each of its brands also use LinkedIn and Instagram as a means of disclosing information about Gap Inc. and for complying with disclosure obligations under Regulation FD. The social media channels that Gap Inc. and its brands intend to use as a means of disclosing information described above may be updated from time to time as listed on Gap Inc.’s Investor Relations website. The information contained in, or referred to, on our website is not deemed to be incorporated into this Quarterly Report unless otherwise expressly noted.
THE GAP, INC.
TABLE OF CONTENTS
| Page | ||
|---|---|---|
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Condensed Consolidated Balance Sheets as of May 2 , 202 6 , Jan uary 3 1, 202 6 , and May 3 , 20 25 | 1 | |
| Condensed Consolidated Statements of Operations for the 13 Weeks Ended May 2 , 202 6 and May 3 , 20 25 | 2 | |
| Condensed Consolidated Statements of Comprehensive Income for the 13 Weeks Ended May 2 , 202 6 and May 3 , 20 25 | 3 | |
| Condensed Consolidated Statements of Stockholders' Equity for the 13 Weeks Ended May 2 , 202 6 and May 3 , 20 25 | 4 | |
| Condensed Consolidated Statements of Cash Flows for the 13 Weeks Ended May 2 , 202 6 and May 3 , 2 025 | 5 | |
| Notes to Condensed Consolidated Financial Statements | 6 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 |
| Item 4. | Controls and Procedures | 21 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 22 |
| Item 1A. | Risk Factors | 22 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| Item 5. | Other Information | 22 |
| Item 6. | Exhibits | 23 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
THE GAP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| ($ and shares in millions except par value) | May 2, 2026 | January 31, 2026 | May 3, 2025 |
|---|---|---|---|
| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | $ 2,162 | $ 2,616 | $ 1,976 |
| Short-term investments | 399 | 386 | 244 |
| Merchandise inventory | 2,095 | 2,207 | 2,097 |
| Other current assets | 583 | 568 | 567 |
| Total current assets | 5,239 | 5,777 | 4,884 |
| Property and equipment, net of accumulated depreciation of $ 5,173 , $ 5,114 , and $ 5,035 | 2,535 | 2,507 | 2,470 |
| Operating lease assets | 3,480 | 3,443 | 3,267 |
| Other long-term assets | 883 | 905 | 944 |
| Total assets | $ 12,137 | $ 12,632 | $ 11,565 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||
| Current liabilities: | |||
| Accounts payable | $ 1,298 | $ 1,567 | $ 1,292 |
| Accrued expenses and other current liabilities | 883 | 1,044 | 841 |
| Current portion of operating lease liabilities | 631 | 634 | 633 |
| Income taxes payable | 89 | 55 | 88 |
| Total current liabilities | 2,901 | 3,300 | 2,854 |
| Long-term liabilities: | |||
| Long-term debt | 1,492 | 1,492 | 1,490 |
| Long-term operating lease liabilities | 3,519 | 3,485 | 3,363 |
| Other long-term liabilities | 570 | 554 | 537 |
| Total long-term liabilities | 5,581 | 5,531 | 5,390 |
| Commitments and contingencies (see Note 9) | |||
| Stockholders’ equity: | |||
| Common stock $ 0.05 par value | |||
| Authorized 2,300 shares for all periods presented; Issued and Outstanding 361 , 372 , and 374 shares | 18 | 19 | 19 |
| Additional paid-in capital | — | 136 | 91 |
| Retained earnings | 3,602 | 3,608 | 3,171 |
| Accumulated other comprehensive income | 35 | 38 | 40 |
| Total stockholders’ equity | 3,655 | 3,801 | 3,321 |
| Total liabilities and stockholders’ equity | $ 12,137 | $ 12,632 | $ 11,565 |
See Accompanying Notes to Condensed Consolidated Financial Statements
THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| ($ and shares in millions except per share amounts) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Net sales | $ 3,497 | $ 3,463 |
| Cost of goods sold and occupancy expenses | 2,080 | 2,015 |
| Gross profit | 1,417 | 1,448 |
| Operating expenses | 972 | 1,188 |
| Operating income | 445 | 260 |
| Interest expense | 22 | 23 |
| Interest income | ( 27 ) | ( 26 ) |
| Income before income taxes | 450 | 263 |
| Income tax expense | 111 | 70 |
| Net income | $ 339 | $ 193 |
| Weighted-average number of shares - basic | 367 | 375 |
| Weighted-average number of shares - diluted | 378 | 382 |
| Earnings per share - basic | $ 0.92 | $ 0.51 |
| Earnings per share - diluted | $ 0.90 | $ 0.51 |
See Accompanying Notes to Condensed Consolidated Financial Statements
THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Net income | $ 339 | $ 193 |
| Other comprehensive loss, net of tax | ||
| Foreign currency translation and other, net of tax expense of $ — and $ 1 | ( 1 ) | ( 2 ) |
| Change in fair value of derivative financial instruments, net of tax expense (tax benefit) of $ 1 and $( 2 ) | — | ( 14 ) |
| Reclassification adjustment for gains on derivative financial instruments, net of tax expense of $( 1 ) and $( 1 ) | ( 2 ) | ( 4 ) |
| Other comprehensive loss, net of tax | ( 3 ) | ( 20 ) |
| Comprehensive income | $ 336 | $ 173 |
See Accompanying Notes to Condensed Consolidated Financial Statements
THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| ($ and shares in millions except per share amounts) | Common Stock — Shares | Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total |
|---|---|---|---|---|---|---|
| Balance as of January 31, 2026 | 372 | $ 19 | $ 136 | $ 3,608 | $ 38 | $ 3,801 |
| Net income for the 13 weeks ended May 2, 2026 | 339 | 339 | ||||
| Other comprehensive loss, net of tax | ( 3 ) | ( 3 ) | ||||
| Repurchases and retirement of common stock, including excise tax | ( 15 ) | ( 1 ) | ( 121 ) | ( 282 ) | ( 404 ) | |
| Issuance of common stock related to stock options and employee stock purchase plans | — | — | 7 | 7 | ||
| Issuance of common stock and withholding tax payments related to vesting of stock units | 4 | — | ( 62 ) | ( 62 ) | ||
| Share-based compensation, net of forfeitures | 40 | 40 | ||||
| Common stock dividends declared and paid ($ 0.175 per share) | ( 63 ) | ( 63 ) | ||||
| Balance as of May 2, 2026 | 361 | $ 18 | $ — | $ 3,602 | $ 35 | $ 3,655 |
| Balance as of February 1, 2025 | 374 | $ 19 | $ 146 | $ 3,039 | $ 60 | $ 3,264 |
| Net income for the 13 weeks ended May 3, 2025 | 193 | 193 | ||||
| Other comprehensive loss, net of tax | ( 20 ) | ( 20 ) | ||||
| Repurchases and retirement of common stock, including excise tax | ( 4 ) | — | ( 70 ) | — | ( 70 ) | |
| Issuance of common stock related to stock options and employee stock purchase plans | 1 | — | 6 | 6 | ||
| Issuance of common stock and withholding tax payments related to vesting of stock units | 3 | — | ( 28 ) | ( 28 ) | ||
| Share-based compensation, net of forfeitures | 37 | 37 | ||||
| Common stock dividends declared and paid ($ 0.165 per share) | ( 61 ) | ( 61 ) | ||||
| Balance as of May 3, 2025 | 374 | $ 19 | $ 91 | $ 3,171 | $ 40 | $ 3,321 |
See Accompanying Notes to Condensed Consolidated Financial Statements
THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Cash flows from operating activities: | ||
| Net income | $ 339 | $ 193 |
| Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||
| Depreciation and amortization | 128 | 121 |
| Share-based compensation | 40 | 37 |
| Non-cash and other items | 2 | ( 1 ) |
| Deferred income taxes | 19 | 8 |
| Changes in operating assets and liabilities: | ||
| Merchandise inventory | 112 | ( 18 ) |
| Other current assets and other long-term assets | ( 33 ) | ( 45 ) |
| Accounts payable | ( 291 ) | ( 203 ) |
| Accrued expenses and other liabilities | ( 161 ) | ( 268 ) |
| Income taxes payable, net of receivables and other tax-related items | 63 | 55 |
| Operating lease assets and liabilities, net | ( 5 ) | ( 19 ) |
| Net cash provided by (used for) operating activities | 213 | ( 140 ) |
| Cash flows from investing activities: | ||
| Purchases of property and equipment | ( 135 ) | ( 83 ) |
| Purchases of short-term investments | ( 112 ) | ( 78 ) |
| Proceeds from sales and maturities of short-term investments | 98 | 88 |
| Net cash used for investing activities | ( 149 ) | ( 73 ) |
| Cash flows from financing activities: | ||
| Proceeds from issuances under share-based compensation plans | 7 | 6 |
| Withholding tax payments related to vesting of stock units | ( 62 ) | ( 28 ) |
| Repurchases of common stock | ( 401 ) | ( 70 ) |
| Cash dividends paid | ( 63 ) | ( 61 ) |
| Net cash used for financing activities | ( 519 ) | ( 153 ) |
| Effect of foreign exchange rate fluctuations on cash, cash equivalents, and restricted cash | — | 5 |
| Net decrease in cash, cash equivalents, and restricted cash | ( 455 ) | ( 361 ) |
| Cash, cash equivalents, and restricted cash at beginning of period | 2,644 | 2,365 |
| Cash, cash equivalents, and restricted cash at end of period | $ 2,189 | $ 2,004 |
| Supplemental disclosure of cash flow information: | ||
| Cash paid for interest during the period | $ 30 | $ 31 |
| Cash paid for income taxes during the period, net of refunds | $ 33 | $ 11 |
See Accompanying Notes to Condensed Consolidated Financial Statements
THE GAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Accounting Policies
Basis of Presentation
In the opinion of The Gap, Inc. (Gap Inc., the “Company,” “we,” and “our”) management, the accompanying unaudited Condensed Consolidated Financial Statements contain all normal and recurring adjustments (except as otherwise disclosed) considered necessary to present fairly our financial position, results of operations, comprehensive income, stockholders' equity, and cash flows as of May 2, 2026 and May 3, 2025 and for all periods presented. The Condensed Consolidated Balance Sheet as of January 31, 2026 has been derived from our audited financial statements.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted from these interim financial statements, although the Company believes that the disclosures made are adequate to make the information not misleading. Certain prior period amounts have been reclassified to conform to the current period presentation. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Our most significant accounting judgments include, but are not limited to, estimates and assumptions used for inventory valuation, income taxes and valuation allowances, sales return and bad debt allowances, deferred revenue, and the impairment of long-lived assets.
In fiscal 2025, the United States enacted significant changes to its trade policy and imposed substantial tariffs on imported goods from most countries. In February 2026, the U.S. Supreme Court invalidated certain tariffs previously imposed, and subsequently, new tariffs were imposed pursuant to alternative statutory authority. As there continues to be ongoing legal and regulatory developments to trade policy and tariffs, we will continue to consider the impact of these developments on the assumptions and estimates used when preparing our quarterly financial statements.
Interchange Fee Settlement
In February 2026, the Company entered into settlement agreements to resolve credit card interchange fee litigation matters in which we were a plaintiff. As a result of this settlement, we recorded a gain of $ 313 million, net of legal fees, which was recognized within operating expenses on the Condensed Consolidated Statements of Operations.
Restricted Cash
As of May 2, 2026, January 31, 2026, and May 3, 2025, restricted cash primarily included consideration that serves as collateral for our insurance obligations and certain other obligations occurring in the normal course of business. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets to the total shown on the Condensed Consolidated Statements of Cash Flows:
| ($ in millions) | May 2, 2026 | January 31, 2026 | May 3, 2025 |
|---|---|---|---|
| Cash and cash equivalents, per Condensed Consolidated Balance Sheets | $ 2,162 | $ 2,616 | $ 1,976 |
| Restricted cash included in other long-term assets | 27 | 28 | 28 |
| Total cash, cash equivalents, and restricted cash, per Condensed Consolidated Statements of Cash Flows | $ 2,189 | $ 2,644 | $ 2,004 |
Accounting Pronouncements
Except as noted below, the Company has considered all recent accounting pronouncements and concluded that there are no recent accounting pronouncements that may have a material impact on the Condensed Consolidated Financial Statements and disclosures, based on current information.
ASU No. 2024-03, Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. The ASU is intended to improve financial reporting by requiring disaggregated disclosure of certain costs and expenses. The ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The ASU may be applied on either a prospective or retrospective basis. We are currently assessing the impact that this ASU will have on the Company's disclosures.
ASU No. 2025-06, Targeted Improvements to the Accounting for Internal-Use Software
In September 2025, the FASB issued ASU No. 2025-06, Targeted Improvements to the Accounting for Internal-Use Software. The ASU is intended to clarify and modernize the accounting for costs related to internal-use software. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2027, with early adoption permitted. The ASU may be applied using a prospective, retrospective, or modified transition approach. We are currently assessing the impact this ASU may have on the Company's Consolidated Financial Statements and related disclosures.
ASU No. 2025-09, Hedge Accounting Improvements
In November 2025, the FASB issued ASU No. 2025-09, Hedge Accounting Improvements. The ASU is intended to more closely align hedge accounting with the economics of risk management activities. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2026, with early adoption permitted. The ASU should be applied on a prospective basis. We are currently assessing the impact that this ASU will have on the Company's Consolidated Financial Statements and related disclosures.
Note 2. Revenue
We disaggregate our net sales by channel and also by brand and region. Net sales by region are allocated based on the location of the store where the customer paid for and received the merchandise; the distribution center or store from which the products were shipped; or the region of the franchise or licensing partner.
Net sales disaggregated by channel are as follows:
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Store and franchise sales | $ 2,162 | $ 2,107 |
| Online sales (1) | 1,335 | 1,356 |
| Total net sales | $ 3,497 | $ 3,463 |
(1) Online sales primarily include sales originating from our online channel including those that are picked up or shipped from stores and net sales from revenue-generating strategic initiatives.
Net sales disaggregated by brand and region are as follows:
| ($ in millions) | Old Navy Global | Gap Global | Banana Republic Global | Athleta Global | Other (2) | Total |
|---|---|---|---|---|---|---|
| 13 Weeks Ended May 2, 2026 | ||||||
| U.S. (1) | $ 1,834 | $ 608 | $ 375 | $ 262 | $ 4 | $ 3,083 |
| Canada | 150 | 68 | 37 | 7 | — | 262 |
| Other regions | 12 | 120 | 19 | 1 | — | 152 |
| Total | $ 1,996 | $ 796 | $ 431 | $ 270 | $ 4 | $ 3,497 |
| ($ in millions) | Old Navy Global | Gap Global | Banana Republic Global | Athleta Global | Other (2) | Total |
|---|---|---|---|---|---|---|
| 13 Weeks Ended May 3, 2025 | ||||||
| U.S. (1) | $ 1,826 | $ 545 | $ 373 | $ 299 | $ 22 | $ 3,065 |
| Canada | 140 | 61 | 35 | 8 | — | 244 |
| Other regions | 15 | 118 | 20 | 1 | — | 154 |
| Total | $ 1,981 | $ 724 | $ 428 | $ 308 | $ 22 | $ 3,463 |
(1) U.S. includes the United States and Puerto Rico.
(2) Primarily consists of net sales from revenue-generating strategic initiatives.
We defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards, licensing agreements, outstanding loyalty points, and reimbursements of loyalty program rewards associated with our credit card agreement. For the 13 weeks ended May 2, 2026, the opening balance of deferred revenue for these obligations was $ 272 million, of which $ 85 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $ 259 million as of May 2, 2026.
For the 13 weeks ended May 3, 2025, the opening balance of deferred revenue for these obligations was $ 273 million, of which $ 94 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $ 249 million as of May 3, 2025.
As part of our credit card program agreements with Barclays and Mastercard, we received an upfront payment of $ 60 million prior to the program launch in May 2022, which is being recognized as revenue over the term of the agreements. We also receive revenue sharing from our credit card agreement for private label and co-branded credit cards.
Note 3. Debt and Credit Facilities
Long-term debt recorded on the Condensed Consolidated Balance Sheets consists of the following:
| ($ in millions) | May 2, 2026 | January 31, 2026 | May 3, 2025 |
|---|---|---|---|
| 2029 Notes | $ 750 | $ 750 | $ 750 |
| 2031 Notes | 750 | 750 | 750 |
| Less: Unamortized debt issuance costs | ( 8 ) | ( 8 ) | ( 10 ) |
| Total long-term debt | $ 1,492 | $ 1,492 | $ 1,490 |
The scheduled maturity of the Senior Notes is as follows:
| Scheduled Maturity ($ in millions) | Principal | Interest Rate | Interest Payments |
|---|---|---|---|
| October 1, 2029 (1) | $ 750 | 3.625 % | Semi-Annual |
| October 1, 2031 (2) | 750 | 3.875 % | Semi-Annual |
| Total issuance | $ 1,500 |
(1) On or after October 1, 2024, includes an option to redeem the 2029 Notes, in whole or in part at any time, at stated redemption prices.
(2) Includes an option to redeem the 2031 Notes, in whole or in part at any time, subject to a make-whole premium, prior to October 1, 2026. On or after October 1, 2026, includes an option to redeem the 2031 Notes, in whole or in part at any time, at stated redemption prices.
We have $ 1.5 billion aggregate principal amount of 3.625 percent senior notes due 2029 (“2029 Notes”) and 3.875 percent senior notes due 2031 (“2031 Notes”) (the 2029 Notes and the 2031 Notes, collectively, the “Senior Notes”). As of May 2, 2026, the aggregate estimated fair value of the Senior Notes was $ 1.40 billion and was based on the quoted market prices for each of the Senior Notes (level 1 inputs) as of the last business day of the fiscal quarter. The aggregate principal amount of the Senior Notes is recorded in long-term debt on the Condensed Consolidated Balance Sheets, net of the unamortized debt issuance costs.
We also have a senior secured asset-based revolving credit agreement (the "ABL Facility"), which has a $ 2.2 billion borrowing capacity and generally bears interest at a per annum rate based on Secured Overnight Financing Rate ("SOFR") (subject to a zero floor) plus a margin, depending on borrowing base availability. The ABL Facility is scheduled to expire in July 2027 and is available for working capital, capital expenditures, and other general corporate purposes.
There were no borrowings under the ABL Facility as of May 2, 2026, January 31, 2026, or May 3, 2025.
We also have the ability to issue letters of credit on our ABL Facility. As of May 2, 2026, we had $ 56 million in standby letters of credit issued under the ABL Facility.
Note 4. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company categorizes financial assets and liabilities recorded at fair value based upon a three-level hierarchy that considers the related valuation techniques.
There were no material purchases, sales, issuances, or settlements related to recurring level 3 measurements for the 13 weeks ended May 2, 2026 or May 3, 2025.
Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents are as follows:
| ($ in millions) | May 2, 2026 | Fair Value Measurements at Reporting Date Using — Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) |
|---|---|---|---|---|
| Assets: | ||||
| Cash equivalents | $ 338 | $ 333 | $ 5 | $ — |
| Short-term investments | 399 | 204 | 195 | — |
| Derivative financial instruments | 7 | — | 7 | — |
| Deferred compensation plan assets | 47 | 47 | — | — |
| Other assets | 6 | — | — | 6 |
| Total | $ 797 | $ 584 | $ 207 | $ 6 |
| Liabilities: | ||||
| Derivative financial instruments | $ 6 | $ — | $ 6 | $ — |
| Fair Value Measurements at Reporting Date Using | ||||
| ($ in millions) | January 31, 2026 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) |
| Assets: | ||||
| Cash equivalents | $ 423 | $ 413 | $ 10 | $ — |
| Short-term investments | 386 | 204 | 182 | — |
| Derivative financial instruments | 8 | — | 8 | — |
| Deferred compensation plan assets | 42 | 42 | — | — |
| Other assets | 6 | — | — | 6 |
| Total | $ 865 | $ 659 | $ 200 | $ 6 |
| Liabilities: | ||||
| Derivative financial instruments | $ 9 | $ — | $ 9 | $ — |
| Fair Value Measurements at Reporting Date Using | ||||
| ($ in millions) | May 3, 2025 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) |
| Assets: | ||||
| Cash equivalents | $ 224 | $ 223 | $ 1 | $ — |
| Short-term investments | 244 | 116 | 128 | — |
| Derivative financial instruments | 5 | — | 5 | — |
| Deferred compensation plan assets | 39 | 39 | — | — |
| Other assets | 3 | — | — | 3 |
| Total | $ 515 | $ 378 | $ 134 | $ 3 |
| Liabilities: | ||||
| Derivative financial instruments | $ 14 | $ — | $ 14 | $ — |
We have highly liquid fixed and variable income investments classified as cash equivalents and short-term investments. All highly liquid investments with original maturities of three months or less at the time of purchase are classified as cash and cash equivalents on the Condensed Consolidated Balance Sheets. Our cash equivalents are comprised of money market funds and time deposits recorded at amortized cost, which approximates fair value, as well as debt securities recorded at fair value using market prices for identical or similar assets. We also have highly liquid investments with original maturities of greater than three months and less than two years that are classified as short-term investments on the Condensed Consolidated Balance Sheets. These debt securities are also recorded at fair value using market prices for identical or similar assets.
There were no material realized or unrealized gains or losses or impairment charges related to short-term investments during the 13 weeks ended May 2, 2026 or May 3, 2025.
Derivative financial instruments primarily include foreign exchange forward contracts. See Note 5 of Notes to Condensed Consolidated Financial Statements for information regarding currencies hedged against the U.S. dollar.
We maintain the Gap Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees to defer base compensation and annual bonus up to a maximum percentage, and non-employee directors to defer receipt of a portion of their Board fees. Plan investments are directed by participants and are recorded at market value and designated for the DCP. The fair value of the Company’s DCP assets is determined based on quoted market prices, and the assets are recorded in other long-term assets on the Condensed Consolidated Balance Sheets.
Nonfinancial Assets
We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of the long-lived assets is determined using level 3 inputs and based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores is at the store level.
There were no material impairment charges recorded for long-lived assets during the 13 weeks ended May 2, 2026 or May 3, 2025.
We review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.
There were no impairment charges recorded for goodwill or other indefinite-lived intangible assets during the 13 weeks ended May 2, 2026 or May 3, 2025.
Note 5. Derivative Financial Instruments
We operate in foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations. We use derivative financial instruments to manage our exposure to foreign currency exchange rate risk and do not enter into derivative financial contracts for trading purposes. Consistent with our risk management guidelines, we hedge a portion of our transactions related to merchandise purchases for foreign operations and certain intercompany transactions using foreign exchange forward contracts. These contracts are entered into with large, reputable financial institutions that are monitored for counterparty risk. The currencies hedged against changes in the U.S. dollar are the Canadian dollar, Japanese yen, British pound, Euro, and New Taiwan dollar. Cash flows from derivative financial instruments are classified as cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.
Derivative financial instruments are recorded at fair value on the Condensed Consolidated Balance Sheets as other current assets, other long-term assets, accrued expenses and other current liabilities, or other long-term liabilities.
Cash Flow Hedges
We designate foreign exchange forward contracts used to hedge forecasted merchandise purchases and related costs denominated in U.S. dollars made by our international subsidiaries whose functional currencies are their local currencies as cash flow hedges. The foreign exchange forward contracts entered into to hedge forecasted merchandise purchases and related costs generally have terms of up to 24 months. The effective portion of the gain or loss on the derivative financial instruments is reported as a component of other comprehensive income (loss) and is recognized into net income during the period in which the underlying transaction impacts the Condensed Consolidated Statements of Operations.
Other Derivatives Not Designated as Hedging Instruments
We use foreign exchange forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certain intercompany balances denominated in currencies other than the functional currency of the entity with the intercompany balance. The gain or loss on the derivative financial instruments that represent economic hedges, as well as the remeasurement impact of the underlying intercompany balances, is recorded in operating expenses on the Condensed Consolidated Statements of Operations in the same period and generally offset each other.
Outstanding Notional Amounts
We had foreign exchange forward contracts outstanding in the following notional amounts:
| ($ in millions) | May 2, 2026 | January 31, 2026 | May 3, 2025 |
|---|---|---|---|
| Derivatives designated as cash flow hedges | $ 515 | $ 426 | $ 400 |
| Derivatives not designated as hedging instruments | 433 | 414 | 434 |
| Total | $ 948 | $ 840 | $ 834 |
Quantitative Disclosures about Derivative Financial Instruments
The fair values of foreign exchange forward contracts are as follows:
| ($ in millions) | May 2, 2026 | January 31, 2026 | May 3, 2025 |
|---|---|---|---|
| Derivatives designated as cash flow hedges: | |||
| Other current assets | $ 6 | $ 7 | $ 4 |
| Accrued expenses and other current liabilities | 2 | 2 | 3 |
| Other long-term liabilities | 1 | — | — |
| Derivatives not designated as hedging instruments: | |||
| Other current assets | 1 | 1 | 1 |
| Accrued expenses and other current liabilities | 3 | 7 | 11 |
| Total derivatives in an asset position | $ 7 | $ 8 | $ 5 |
| Total derivatives in a liability position | $ 6 | $ 9 | $ 14 |
The majority of the unrealized gains and losses from designated cash flow hedges as of May 2, 2026 will be recognized in income within the next 12 months at the then-current values, which may differ from the fair values as of May 2, 2026 shown above.
Our foreign exchange forward contracts are subject to master netting arrangements with each of our counterparties and such arrangements are enforceable in the event of default or early termination of the contract. We do not elect to offset the fair values of our derivative financial instruments on the Condensed Consolidated Balance Sheets, and as such, the fair values shown above represent gross amounts. The amounts subject to enforceable master netting arrangements were not material for all periods presented.
See Note 4 of Notes to Condensed Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.
The pre-tax amounts recognized in net income related to derivative instruments are as follows:
| Location and Amount of (Gain) Loss Recognized in Net Income — 13 Weeks Ended May 2, 2026 | 13 Weeks Ended May 3, 2025 | |||
|---|---|---|---|---|
| ($ in millions) | Cost of goods sold and occupancy expenses | Operating expenses | Cost of goods sold and occupancy expenses | Operating expenses |
| Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded | $ 2,080 | $ 972 | $ 2,015 | $ 1,188 |
| (Gain) loss recognized in net income | ||||
| Derivatives designated as cash flow hedges | ( 3 ) | — | ( 5 ) | — |
| Derivatives not designated as hedging instruments | — | ( 2 ) | — | 21 |
| Total (gain) loss recognized in net income | $ ( 3 ) | $ ( 2 ) | $ ( 5 ) | $ 21 |
Note 6. Share Repurchases
Share repurchase activity is as follows:
| ($ and shares in millions except average per share cost) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Number of shares repurchased (1) | 15 | 4 |
| Total cost | $ 361 | $ 70 |
| Average per share cost including commissions | $ 23.71 | $ 19.26 |
(1) Excludes shares withheld to settle employee tax withholding payments related to the vesting of stock units.
In February 2026, the Company's Board of Directors (the "Board") approved a new $ 1.0 billion share repurchase authorization, which superseded and replaced the February 2019 repurchase program. The February 2026 repurchase program had $ 599 million remaining as of May 2, 2026.
On March 10, 2026, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase an aggregate of $ 200 million of the Company's common stock. On March 11, 2026, the Company paid $ 200 million and received an initial delivery of approximately 6.9 million shares of the Company’s common stock. The remaining settlement was accounted for as an unsettled forward contract indexed to the Company's common stock until final settlement. The ASR Agreement was fully settled on May 5, 2026, and the Company received an additional 1.4 million shares of its common stock.
Share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act of 2022. All common stock repurchased is immediately retired.
Note 7. Earnings Per Share
Weighted-average number of shares used for earnings per share is as follows:
| (shares in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Weighted-average number of shares - basic | 367 | 375 |
| Common stock equivalents | 11 | 7 |
| Weighted-average number of shares - diluted | 378 | 382 |
The anti-dilutive shares related to stock options and stock units excluded from computations of weighted-average number of shares – diluted were 1 million and 2 million for the 13 weeks ended May 2, 2026 and May 3, 2025, respectively, as their inclusion would have an anti-dilutive effect on earnings per share. The Company also excluded unsettled shares related to the ASR Agreement from the computation of weighted-average number of shares – diluted for the 13 weeks ended May 2, 2026, as their inclusion would have an anti-dilutive effect on earnings per share.
Note 8. Income Taxes
The effective income tax rate was 24.7 percent for the 13 weeks ended May 2, 2026, compared with 26.6 percent for the 13 weeks ended May 3, 2025. The decrease in the effective tax rate is primarily due to more favorable impacts of share-based compensation, the recognition of certain tax benefits associated with foreign entity structure changes, as well as changes in the amount and mix of jurisdictional earnings.
Note 9. Commitments and Contingencies
We are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters. These contracts primarily relate to our commercial contracts, operating leases, trademarks, intellectual property, financial agreements and guarantees, and various other agreements. Under these contracts, we may provide certain routine indemnifications relating to representations and warranties (e.g., ownership of assets, environmental or tax indemnifications), or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. Generally, the maximum obligation under such indemnifications is not explicitly stated, and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on the Condensed Consolidated Financial Statements taken as a whole.
As a multinational company, we are subject to various proceedings, lawsuits, disputes, and claims ("Actions") arising in the ordinary course of our business. Many of these Actions raise complex factual, tax, and legal issues and are subject to uncertainties. As of May 2, 2026, Actions filed against us included commercial, intellectual property, customer, employment, securities, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages and some are covered in part by insurance. As of May 2, 2026, January 31, 2026, and May 3, 2025, we recorded a liability for an estimated loss if the outcome of an Action is expected to result in a loss that is considered probable and reasonably estimable. The liability recorded was not material for any individual Action or in total for all periods presented. Subsequent to May 2, 2026, and through the filing date of this Quarterly Report on Form 10-Q, no information has become available that indicates a change is required that would be material to the Condensed Consolidated Financial Statements taken as a whole.
We cannot predict with assurance the outcome of Actions brought against us. However, we do not believe that the outcome of any current Action would have a material effect on the Condensed Consolidated Financial Statements taken as a whole.
Note 10. Segment Information
We identify our operating segments according to how our business activities are managed and evaluated. As of May 2, 2026, our operating segments included: Old Navy Global, Gap Global, Banana Republic Global, and Athleta Global. Each of our brands serves customer demand through our store and franchise channel and our online channel, leveraging our omni-channel capabilities that allow customers to shop seamlessly across all of our brands. Additionally, our products, suppliers, customers, methods of distribution, and regulatory environment are similar across our brands. We have determined that each of our operating segments share similar qualitative and economic characteristics, and therefore the results of our operating segments are aggregated into one reportable segment as of May 2, 2026. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.
Gap Inc.’s chief operating decision maker ("CODM") is our President and Chief Executive Officer. The CODM reviews measures of segment profit or loss by comparing budgeted versus actual and forecasted results for purposes of assessing performance, allocating resources, and making decisions. The measure of segment assets is reported on the Condensed Consolidated Balance Sheets in total.
The following table presents information for segment profit and significant expenses:
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Net sales | $ 3,497 | $ 3,463 |
| Cost of goods sold | 1,605 | 1,554 |
| Occupancy expenses (1) | 475 | 461 |
| Operating expenses (2) | 972 | 1,188 |
| Operating income | $ 445 | $ 260 |
(1) Occupancy expenses include lease and other occupancy related cost, depreciation, and amortization related to our store operations, distribution centers, information technology, and certain corporate functions.
(2) Operating expenses primarily include payroll and benefits expenses, advertising expenses, information technology expenses and maintenance costs, and other administrative expenses. For the 13 weeks ended May 2, 2026, operating expenses include a gain of $ 313 million related to a credit card interchange fee litigation settlement, net of legal fees, and a $ 50 million charitable contribution made concurrently.
See Note 2 of Notes to Condensed Consolidated Financial Statements for disaggregation of revenue by channel and by brand and region.
Note 11. Supply Chain Finance Program
Our voluntary supply chain finance ("SCF") program provides certain suppliers with the opportunity to sell their receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. We are not a party to the agreements between our suppliers and the financial institutions and our payment terms are not impacted by whether a supplier participates in the SCF program.
The Company's outstanding obligations under the SCF program were $ 339 million, $ 390 million, and $ 313 million as of May 2, 2026, January 31, 2026, and May 3, 2025, respectively, and were included in accounts payable on the Condensed Consolidated Balance Sheets.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
OUR BUSINESS
We are a house of iconic American brands offering apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. Our products are available to customers both in stores and online, through Company-operated and franchise stores, websites, and third-party arrangements. We have Company-operated stores in the United States, Canada, Japan, and Taiwan. We also have franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta throughout Asia, Australia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate, or will operate, stores and websites that sell apparel and related products under our brand names. In addition to operating in the specialty, outlet, online, and franchise channels, we use our omni-channel capabilities to bridge the digital world and physical stores. The shopping experience is further enhanced by our omni-channel services, including buy online pick-up in store, order-in-store, and ship-from-store, as well as enhanced mobile-enabled experiences, which allow our customers to shop seamlessly across our brands and channels. Our brands have shared investments in supply chain and information technology, which allows us to optimize efficiency and responsiveness in our operations. Most of the products sold under our brand names are designed by us and manufactured by independent sources globally.
OVERVIEW
Financial results for the first quarter of fiscal 2026 are as follows:
• Net sales for the first quarter of fiscal 2026 increased 1 percent compared with the first quarter of fiscal 2025.
• Gross profit for the first quarter of fiscal 2026 was $1.42 billion compared with $1.45 billion for the first quarter of fiscal 2025. Gross margin for the first quarter of fiscal 2026 was 40.5 percent compared with 41.8 percent for the first quarter of fiscal 2025.
• Operating income for the first quarter of fiscal 2026 was $445 million compared with $260 million for the first quarter of fiscal 2025. The first quarter of fiscal 2026 includes a gain of $313 million related to a credit card interchange fee litigation settlement, net of legal fees, partially offset by a $50 million charitable contribution made concurrently.
• The effective income tax rate for the first quarter of fiscal 2026 was 24.7 percent compared with 26.6 percent for the first quarter of fiscal 2025.
• Net income for the first quarter of fiscal 2026 was $339 million compared with $193 million for the first quarter of fiscal 2025.
• Diluted earnings per share was $0.90 for the first quarter of fiscal 2026 compared with $0.51 for the first quarter of fiscal 2025.
We are focused on building momentum through the following strategic priorities:
• delivering financial and operational rigor, through an optimized cost structure and disciplined execution;
• building our brands to increase relevance, while we elevate our product and customer experience to drive sustainable growth;
• optimizing our platform to drive scale by advancing capabilities that amplify and enable our brands;
• strengthening our culture by developing talent and fostering a high-performance environment; and
• continuing to integrate sustainability into business practices to support long-term growth.
Our execution of these strategic priorities will position us to continue growing our core apparel business, while pursuing new strategic initiatives. We are expanding our beauty and accessories assortment, increasing customer engagement through our revamped loyalty program, and advancing technology capabilities throughout our organization.
Macroeconomic factors, including uncertainty surrounding global geopolitical instability, inflationary pressures, foreign currency fluctuations, and changes in interest rates, duties, tariffs, tax laws, and other restrictions as a result of government fiscal, monetary, trade, and tax policies, continue to create a complex and challenging retail environment.
In fiscal 2025, the United States enacted significant changes to its trade policy and imposed substantial tariffs on imported goods from most countries. In February 2026, the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"), and subsequently, new tariffs were imposed on a temporary basis pursuant to alternative statutory authority. In April 2026, the U.S. Customs and Border Protection launched a platform for importers of record to submit IEEPA tariff refund requests. We are currently evaluating our eligibility within the tariff refund process and monitoring related developments and will recognize the refund when the right to receive any amounts becomes probable and estimable. The timing and amount of any potential refund remains uncertain and may be subject to further legal and regulatory developments.
With continued uncertainty expected, we will continue to monitor the impact of macroeconomic conditions on consumer behavior and demand.
RESULTS OF OPERATIONS
Net Sales
See Note 2 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for net sales disaggregation.
Comparable Sales ("Comp Sales")
Comp Sales include the results of Company-operated stores and sales through our online channel. The calculation of Comp Sales excludes the results of our franchise and licensing business.
A store is included in the Comp Sales calculations when it has been open and operated by the Company for at least one year and the selling square footage has not changed by 15 percent or more within the past year. A store is included in the Comp Sales calculations on the first day it has comparable prior year sales. Stores in which the selling square footage has changed by 15 percent or more as a result of a remodel, expansion, or reduction are excluded from the Comp Sales calculations until the first day they have comparable prior year sales.
A store is considered non-comparable ("Non-comp") when it has been open and operated by the Company for less than one year or has changed its selling square footage by 15 percent or more within the past year.
A store is considered "Closed" if it is temporarily closed for three or more full consecutive days or it is permanently closed. When a temporarily closed store reopens, the store will be placed in the Comp/Non-comp status it was in prior to its closure. If a store was in Closed status for three or more days in the prior year, the store will be in Non-comp status for the same days the following year.
Current year foreign exchange rates are applied to both current year and prior year Comp Sales to achieve a consistent basis for comparison.
The percentage change in Comp Sales by global brand and for The Gap, Inc., as compared with the preceding year, is as follows:
| 13 Weeks Ended — May 2, 2026 | May 3, 2025 | |
|---|---|---|
| Old Navy Global | 1 % | 3 % |
| Gap Global | 10 % | 5 % |
| Banana Republic Global | 2 % | — % |
| Athleta Global | (11) % | (8) % |
| The Gap, Inc. | 2 % | 2 % |
Store count, net openings/closings, and square footage for our stores are as follows:
| January 31, 2026 — Number of Store Locations | 13 Weeks Ended May 2, 2026 — Net Number of Stores Opened/(Closed) | May 2, 2026 — Number of Store Locations | Square Footage (in millions) | |
|---|---|---|---|---|
| Old Navy North America | 1,242 | (1) | 1,241 | 19.6 |
| Gap North America | 459 | — | 459 | 4.9 |
| Gap Asia | 123 | 5 | 128 | 1.1 |
| Banana Republic North America | 358 | (4) | 354 | 2.9 |
| Banana Republic Asia | 40 | 3 | 43 | 0.1 |
| Athleta North America | 252 | — | 252 | 1.0 |
| Company-operated stores total | 2,474 | 3 | 2,477 | 29.6 |
| February 1, 2025 | 13 Weeks Ended May 3, 2025 | May 3, 2025 | ||
| Number of Store Locations | Net Number of Stores Opened/(Closed) | Number of Store Locations | Square Footage (in millions) | |
| Old Navy North America | 1,249 | (3) | 1,246 | 19.7 |
| Gap North America | 453 | — | 453 | 4.8 |
| Gap Asia | 122 | 2 | 124 | 1.1 |
| Banana Republic North America | 380 | (8) | 372 | 3.1 |
| Banana Republic Asia | 42 | (1) | 41 | 0.1 |
| Athleta North America | 260 | — | 260 | 1.1 |
| Company-operated stores total | 2,506 | (10) | 2,496 | 29.9 |
Outlet and factory stores are reflected in each of the respective brands.
As of May 2, 2026 and May 3, 2025, the Company's franchise partners operated approximately 1,000 franchise stores.
Net Sales
Our net sales increased $34 million, or 1 percent, during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, primarily driven by an increase in net sales across all brands except Athleta Global.
Cost of Goods Sold and Occupancy Expenses
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Cost of goods sold and occupancy expenses | $ 2,080 | $ 2,015 |
| Gross profit | $ 1,417 | $ 1,448 |
| Cost of goods sold and occupancy expenses as a percentage of net sales | 59.5 % | 58.2 % |
| Gross margin | 40.5 % | 41.8 % |
Cost of goods sold and occupancy expenses increased 1.3 percentage points as a percentage of net sales in the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.
• Cost of goods sold increased 1.0 percentage point as a percentage of net sales in the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, primarily driven by an estimated impact of approximately 2 percentage points from tariff costs net of related mitigation efforts, partially offset by less promotional activity primarily at Gap Global.
• Occupancy expenses increased 0.3 percentage points as a percentage of net sales in the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, primarily driven by incremental cost related to our store population.
Uncertainty surrounding changes in U.S. trade policy and tariff rates is contributing to overall macroeconomic volatility. The Company continues to evaluate the impact of U.S. trade policy and tariff rates, which has increased cost of goods sold since fiscal 2025. Ongoing developments, including changes to tariff rates or potential refunds, will impact our gross margins in future quarters and will also impact comparability across periods. The timing and amount of any refunds remain uncertain and subject to legal and regulatory developments. As a result of these ongoing dynamics, our gross margin for the first quarter of fiscal 2026 may not be indicative of our gross margins throughout the remainder of fiscal 2026.
Operating Expenses
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Operating expenses | $ 972 | $ 1,188 |
| Operating expenses as a percentage of net sales | 27.8 % | 34.3 % |
| Operating margin | 12.7 % | 7.5 % |
Operating expenses decreased $216 million, or 6.5 percentage points as a percentage of net sales during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, primarily due to the following:
• a gain of $313 million related to a credit card interchange fee litigation settlement, net of legal fees; partially offset by
• a $50 million charitable contribution made concurrently with the interchange fee litigation settlement; and
• an increase in strategic investments.
Interest Expense
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Interest expense | $ 22 | $ 23 |
Interest expense primarily includes interest on outstanding borrowings and obligations mainly related to our Senior Notes and tax-related interest expense.
Interest Income
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Interest income | $ (27) | $ (26) |
Interest income primarily includes interest earned on our cash, cash equivalents, and short-term investments, as well as tax-related interest income. Interest income increased slightly during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, primarily due to higher cash balances, partially offset by lower interest rates.
Income Taxes
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Income tax expense | $ 111 | $ 70 |
| Effective tax rate | 24.7 % | 26.6 % |
The decrease in the effective tax rate for the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025 is primarily due to more favorable impacts of share-based compensation, the recognition of certain tax benefits associated with foreign entity structure changes, as well as changes in the amount and mix of jurisdictional earnings.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity include cash and cash equivalents, short-term investments, and our ABL Facility. As of May 2, 2026, we had cash and cash equivalents of $2.16 billion and short-term investments of $399 million. We hold our cash, cash equivalents, and short-term investments across a diversified set of reputable financial institutions and monitor the credit standing of those financial institutions. In addition, we are also able to supplement near-term liquidity, if necessary, with our ABL Facility or other available market instruments. There were no borrowings under the ABL Facility as of May 2, 2026. See Note 3 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on our debt and credit facilities.
Our largest source of operating cash flows is cash collections from the sale of our merchandise. Our primary uses of cash include merchandise inventory purchases, lease and occupancy costs, personnel-related expenses, purchases of property and equipment, shipping costs, and payment of taxes. In addition, we may have dividend payments and share repurchases. The seasonality of our operations, in addition to the impact of macroeconomic factors, may lead to significant fluctuations in certain asset and liability accounts as well as cash inflows and outflows between fiscal year-end and subsequent interim periods. These macroeconomic factors include uncertainty surrounding global geopolitical instability, inflationary pressures, foreign currency fluctuations, and changes in interest rates, duties, tariffs, tax laws, and other restrictions as a result of government fiscal, monetary, trade, and tax policies.
We believe our existing balances of cash, cash equivalents, and short-term investments, along with our cash flows from operations, and instruments mentioned above, provide sufficient funds for our business operations as well as capital expenditures, dividends, share repurchases, and other liquidity requirements associated with our business operations over the next 12 months and beyond.
Cash Flows from Operating Activities
Net cash provided by operating activities was $213 million during the first quarter of fiscal 2026 compared with $140 million of net cash used for operating activities during the first quarter of fiscal 2025, primarily due to the following:
Net Income
• an increase in net income, primarily due to a gain of $313 million related to a credit card interchange fee litigation settlement, net of legal fees, partially offset by a $50 million charitable contribution made concurrently;
Changes in operating assets and liabilities
• an increase of $130 million related to merchandise inventory, in part due to timing of receipts during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025 as well as fluctuations to inventory-related costs related to changes in tariff rates; and
• an increase of $107 million related to accrued expenses and other liabilities, in part due to lower payments for performance-based compensation during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.
Cash Flows from Investing Activities
Net cash used for investing activities increased $76 million during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, primarily due to the following:
• $52 million more purchases of property and equipment during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, primarily related to store investments; and
• $24 million more net purchases of short-term investments during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.
Cash Flows from Financing Activities
Net cash used for financing activities increased $366 million during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025, primarily due to $331 million more repurchases of common stock, during the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. We believe free cash flow is an important metric because it represents a measure of how much cash a company has available for discretionary and non-discretionary items after the deduction of capital expenditures. We require regular capital expenditures to build and maintain our stores and distribution centers and for technology investments. We use this metric internally, as we believe our sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results.
The following table reconciles free cash flow, a non-GAAP financial measure, from a GAAP financial measure.
| ($ in millions) | 13 Weeks Ended — May 2, 2026 | May 3, 2025 |
|---|---|---|
| Net cash provided by (used for) operating activities (1) | $ 213 | $ (140) |
| Less: Purchases of property and equipment | (135) | (83) |
| Free cash flow | $ 78 | $ (223) |
(1) For the 13 weeks ended May 2, 2026, net cash provided by operating activities includes the impact of a gain of $313 million related to a credit card interchange fee litigation settlement, net of legal fees, and a $50 million charitable contribution made concurrently.
Dividend Policy
In determining whether and at what level to declare a dividend, our Board considers a number of factors including sustainability, operating performance, liquidity, and market conditions.
We paid a dividend of $0.175 per share during the first quarter of fiscal 2026. In May 2026, the Board authorized a dividend of $0.175 per share for the second quarter of fiscal 2026.
Share Repurchases
Certain information about the Company’s share repurchases is set forth in Note 6 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Summary Disclosures about Contractual Cash Obligations and Commercial Commitments
There have been no material changes to our contractual obligations and commercial commitments as disclosed in our Annual Report on Form 10-K as of January 31, 2026, other than those which occur in the normal course of business. See Note 9 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on commitments and contingencies.
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026. See Note 1 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on accounting policies.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our market risk profile as of January 31, 2026 is disclosed in our Annual Report on Form 10-K and has not significantly changed. See Notes 3, 4, and 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on our debt and credit facilities, investments, and derivative financial instruments.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the Company’s first quarter of fiscal 2026 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
As a multinational company, we are subject to various proceedings, lawsuits, disputes, and claims ("Actions") arising in the ordinary course of our business. Many of these Actions raise complex factual, tax, and legal issues, and are subject to uncertainties. Actions filed against us from time to time include commercial, intellectual property, customer, employment, securities, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages, and some are covered in part by insurance.
We cannot predict with assurance the outcome of Actions brought against us. Accordingly, developments, settlements, or resolutions may occur and impact operations in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material effect on our financial results.
Item 1A. Risk Factors.
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table presents information with respect to purchases of common stock of the Company made for the 13 weeks ended May 2, 2026 by the Company or any affiliated purchaser, as defined by Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended:
| Total Number of Shares Purchased (1) | Average Price Paid Per Share Including Commissions | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or approximate dollar amount) of Shares that May Yet be Purchased Under the Plans or Programs (2) | |
|---|---|---|---|---|
| Month #1 (February 1 - February 28) | — | $ — | — | $1,000 million |
| Month #2 (March 1 - April 4) | 13,803,945 | $ 23.44 | 13,803,945 | $636 million (3) |
| Month #3 (April 5 - May 2) | 1,420,592 | $ 26.32 | 1,420,592 | $599 million |
| Total | 15,224,537 | $ 23.71 | 15,224,537 |
(1) Excludes shares withheld to settle employee tax withholding payments related to the vesting of stock units.
(2) In February 2026, the Board approved a $1 billion share repurchase authorization, which has no expiration date.
(3) The share repurchase authorization in Month #2 has been reduced by $200 million pursuant to the ASR Agreement and $164 million for shares not purchased pursuant to the ASR Agreement. See Note 6 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on our share repurchases.
Item 5. Other Information.
During the 13 weeks ended May 2, 2026, none of our directors or Section 16 officers adopted , modified, or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Item 408(a) of Regulation S-K, except as follows:
On April 2, 2026 , Horacio (Haio) Barbeito , President and CEO of Old Navy , adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) to sell up to 113,683 shares of Gap Inc. common stock. Unless otherwise terminated pursuant to its terms, the plan will terminate on April 2, 2027, or when all shares under the plan are sold.
On March 19, 2026 , Robert Fisher , a director , adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) to gift up to 23,000 shares of Gap Inc. common stock. Unless otherwise terminated pursuant to its terms, the plan will terminate on March 19, 2027, or when all shares under the plan are gifted.
On March 19, 2026 , William Fisher , a director , adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) to gift up to 23,000 shares of Gap Inc. common stock. Unless otherwise terminated pursuant to its terms, the plan will terminate on March 19, 2027, or when all shares under the plan are gifted.
Item 6. Exhibits.
| Exhibit No. | Exhibit Description | Incorporated by Reference — Form | File No. | Exhibit | Filing Date | Filed/ Furnished Herewith |
|---|---|---|---|---|---|---|
| 3.1 | Restated Certificate of Incorporation | 10-Q | 1-7562 | 3.1 | August 30, 2024 | |
| 3.2 | Amended and Restated Bylaws (effective August 15, 2022) | 10-Q | 1-7562 | 3.3 | August 26, 2022 | |
| 10.1 † | 2026 Form of Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan | 8-K | 1-7562 | 10.1 | March 12, 2026 | |
| 10.2 † | 2026 Form of Deferred Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan | 8-K | 1-7562 | 10.2 | March 12, 2026 | |
| 10.3 † | 2026 Form of Performance Share Agreement under the 2016 Long-Term Incentive Plan | 8-K | 1-7562 | 10.3 | March 12, 2026 | |
| 10.4 † | 2026 Form of Deferred Performance Share Agreement under the 2016 Long-Term Incentive Plan | 8-K | 1-7562 | 10.4 | March 12, 2026 | |
| 10.5 † | 2026 Form of Director Stock Unit Agreement under the 2016 Long-Term Incentive Plan | 8-K | 1-7562 | 10.5 | March 12, 2026 | |
| 31.1 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002) | X | ||||
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002) | X | ||||
| 32.1 | Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 32.2 | Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 101 | The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended May 2, 2026, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders' Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements | X | ||||
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) | X |
† Indicates management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: | May 29, 2026 | THE GAP, INC. — By | /s/ Richard Dickson |
|---|---|---|---|
| Richard Dickson | |||
| President and Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| Date: | May 29, 2026 | By | /s/ Katrina O'Connell |
| Katrina O'Connell | |||
| Executive Vice President and Chief Financial Officer | |||
| (Principal Financial and Accounting Officer) |