The Gap, Inc. GAP has seen its shares plunge 25% in the past three months, underperforming the industry’s decline of 7.2%. The stock has also underperformed the broader sector’s 5.2% decline and the S&P 500 Index’s 5.8% increase over the same period.
GAP Stock’s 3-Month Performance
In the past three months, GAP has trailed the performance of Tapestry, Inc. TPR and Urban Outfitters, Inc. URBN while outperforming Fossil Group, Inc. FOSL. During the same period, shares of URBN, TPR and FOSL have lost 1.7%, 10% and 28.6%, respectively.
GAP’s Share Price Performance VS Peers
Closing at $20.28 in the last trading session, GAP stock stands 30.9% below its 52-week high of $29.36 reached on Feb. 20, 2026. GAP is trading below its 50-day simple moving average of $21.09 and its 200-day simple moving average of $23.87, indicating a weak technical setup.
GAP Trades Below 50 & 200-Day SMA
GAP Lowers Full-Year Outlook Amid Weak Athleta Performance
Gap faces some near-term pressures, primarily from Athleta's slower recovery and a softer outlook for Old Navy. Athleta reported a challenging first-quarter fiscal 2026, with net sales declining 12% year over year to $270 million and comparable sales falling 11%, both below management’s expectations. The company acknowledged that the brand’s turnaround is progressing more slowly than initially anticipated. Looking ahead, management expects the recovery to remain gradual, with second-quarter performance likely to mirror first-quarter trends, suggesting that operating conditions will remain challenging in the near term.
Reflecting these challenges, the company lowered its full-year outlook and now expects net sales growth of 1-2% compared with its previous guidance of 2-3%. Management indicated that the revised outlook primarily reflects a more conservative view of Old Navy’s performance based on sales trends observed early in the year, resulting in a more cautious expectation for overall growth.
The company also expects a softer second quarter of fiscal 2026, with net sales projected to be flat to down 1% year over year. Comparable sales at Old Navy are anticipated to decline in the low-single digits, while second-quarter gross margin is expected to range from flat to down 50 basis points year over year. Approximately 80 basis points of rent, occupancy and depreciation deleverage are likely to pressure profitability.
In addition, management expects results to remain affected by unfavorable credit card dynamics and higher fuel costs. Selling, general and administrative expenses, as a percentage of net sales, are projected to deleverage by approximately 110 to 120 basis points year over year, creating additional cost pressure and limiting operating leverage. Together, these factors are expected to pressure second-quarter profitability despite continued operational improvements.
GAP Invests in AI to Improve Customer Experience & Efficiency
Despite near-term challenges, GAP is likely to benefit from several long-term growth drivers that support customer engagement, brand relevance and operational efficiency. The company is expanding its Fashiontainment platform to deepen consumer connections by bringing together fashion, music, sports and entertainment.
Management views sports as a particularly influential force shaping fashion trends and believes this presents meaningful opportunities to engage consumers during major cultural moments. Its partnership with Fanatics reflects this strategy, and the company intends to pursue additional collaborations tied to major global sporting events to further strengthen brand visibility and consumer engagement.
Gap has also relaunched its Encore loyalty program, transitioning its base of approximately 40 million members from a transaction-focused model to a broader customer engagement platform. At the same time, the company continues to invest in technology and artificial intelligence (AI) to enhance decision-making across the organization. GAP highlighted that AI-powered product intelligence supports critical merchandising functions, including product design, buying, allocation and replenishment, enabling more informed decisions and delivering greater value to customers.
The company is also leveraging AI to improve the customer shopping experience by making it easier to discover relevant products, identify the right fit and explore new assortments. As part of this strategy, Gap is expanding AI-powered product discovery through new shopping partnerships, including Google’s Gemini. Beyond customer-facing applications, management is using AI to improve internal productivity and operational efficiency, helping support continued strategic investments while maintaining disciplined cost management.
How Have Estimates Shaped Up for GAP?
The Zacks Consensus Estimate for GAP’s current quarter and the current year earnings per share has remained unchanged at 50 cents and $2.34, respectively, over the past seven days.
GAP is currently trading at a forward 12-month P/E multiple of 8.25X, lower than the industry average of 14.20X and well below the S&P 500 multiple of 21.13X. The stock is also trading below its 12-month median P/E of 10.48X, reflecting potential undervaluation.
Valuation Picture of GAP
How to Play GAP Stock?
GAP’s valuation appears appealing for investors seeking long-term opportunities, particularly given its strategic initiatives to strengthen brand relevance and improve operational capabilities. However, persistent share price weakness, a more cautious near-term outlook and pressure on earnings expectations indicate that the recovery is still unfolding. While the company has multiple long-term growth catalysts, investors may prefer to wait for clearer evidence of sustained execution and improving business momentum before adopting a more constructive stance.
At present, GAP carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The Gap, Inc. (GAP): Free Stock Analysis Report
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