What Happened?
Shares of clothing and accessories retailer Gap (NYSE: GAP) jumped 0.6% in the morning session after it staged a minor recovery as it fell the previous trading session in response to its mixed second-quarter calendar 2025 results.
The apparel retailer reported earnings of $0.57 per share, beating analyst estimates by 4%. However, the results also pointed to some weakness, as revenue was flat year-over-year at $3.73 billion, and adjusted EBITDA of $377 million missed expectations. Same-store sales grew by a modest 1%. The company's overall performance was described as a "softer quarter" in its earnings release, which caused the stock to initially trade down 4.8%. The subsequent small gain suggests investors may be looking past the weaker metrics to focus on the bottom-line earnings beat.
After the initial pop the shares cooled down to $22.10, up 2% from previous close.
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What Is The Market Telling Us
Gap’s shares are very volatile and have had 20 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 3.2% on the news that strong quarterly results from competitors lifted sentiment across the apparel retail sector. Fellow retailers Abercrombie & Fitch and Kohl's both reported second-quarter results that exceeded analysts' expectations and raised their full-year financial outlooks for 2025. Kohl's shares, in particular, surged nearly 20% on the news. This positive development for the industry comes as Gap is scheduled to report its own quarterly earnings on Thursday.
Adding to the day's optimism, Telsey Advisory Group reiterated its "market perform" rating on Gap's stock, maintaining a price target of $26.00, which implies a potential upside of over 21% from the previous closing price.
Gap is down 6.4% since the beginning of the year, and at $22.10 per share, it is trading 23.5% below its 52-week high of $28.89 from May 2025. Investors who bought $1,000 worth of Gap’s shares 5 years ago would now be looking at an investment worth $1,271.
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