What Happened?
Shares of clothing and accessories retailer Gap (NYSE: GAP) jumped 5.2% in the afternoon session after the company announced a strategic expansion into the beauty and accessories market.
This move aims to diversify revenue and capitalize on the rapidly growing U.S. beauty and personal care market, which is expected to surpass $100 billion in 2025. The expansion will begin with a phased launch this fall, testing curated beauty products in 150 Old Navy stores, with some featuring dedicated shop-in-shops. A broader rollout across its brands is planned for 2026. This initiative builds on the company's successful turnaround, which has seen six consecutive quarters of positive comparable sales. Jefferies analysts view the expansion as a strategic move and a potential "meaningful growth driver," supported by Gap's strong consumer validation and financial flexibility, including $2.4 billion in cash.
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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 6 days ago when the stock gained 0.6% on the news that it staged a minor recovery as it fell the previous day 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.
Gap is up 0.5% since the beginning of the year, but at $23.72 per share, it is still trading 17.9% 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 $1,354.
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