Best Quarter in Years for the Specialty Chain ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Friday, November 21, 2025 |
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Gap reported its best quarter in at least four years, beating EPS and revenue estimates and raising margin guidance for the critical holiday quarter. Gap Inc. operates four divisions—Gap, Old Navy, Banana Republic, and Athleta—but over 80% of its revenue comes from Gap and Old Navy. Since both brands reported comp store sales well above expectations, Gap Inc. can post strong results even if the other divisions underperform. |
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The story here is simple and familiar to readers of the Macke Letter: Denim is rocking. Management mentioned "denim" 17 times during the conference call, noting that denim sales were up "double digits" at both Old Navy and Gap. Gap not only took fewer markdowns overall but also raised prices in the blue jean category without alienating customers. Management credited its marketing efforts for the results. Richard Dickson and his team have notably improved execution and aesthetics across all the Gap Inc. chains. However, Dickson's claim that Gap's "Better in Denim" campaign with Cat's Eye created "a denim story everybody wanted to be part of" during the quarter was a thinly veiled shot at AEO and prompted some eye-rolling on the call. American Eagle might have something to say on the matter when the company reports on December 2nd. |
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Great Quarter, Tough Market |
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In a bullish market, Gap shares would fill the gap in the chart up to $28. In this week's market, $GAP is up about 5%. In the words of the POTUS, "no crying in the casino". This was a great quarter from the largest specialty clothing merchant in America. Gap confirmed what we saw from Walmart, TJX, and Williams-Sonoma earlier in the week: consumers are being "choiceful," but chains that give shoppers what they want at a good price are able to turn in solid results. I'm finding the winners and getting as far away as possible from merchants who have missed the fashion cycle. Find the trends, and the profits will follow. I don't need a Cat's Eye commercial to help move the needle. |
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Jeff Macke | The Macke Portfolio |
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