Severe winter storms and widespread store closures across the United States weighed heavily on the performance of apparel retailer Gap Inc. during the crucial holiday quarter, the company reported on Thursday. The retailer said harsh weather conditions disrupted shopping activity and led to results that were weaker than analysts had anticipated across several of its brands.

During January, large parts of the U.S. experienced freezing temperatures, snowstorms, and icy conditions that forced the temporary shutdown of hundreds of stores. At the height of the storms, approximately 800 locations were closed for short periods, affecting foot traffic and sales performance, particularly at Old Navy.

According to Chief Financial Officer Katrina O’Connell, the company’s brands were showing stronger momentum before the weather disruptions occurred. She noted that sales trends had been improving before the storms hit and reassured investors that customer activity rebounded quickly once conditions improved.

The company operates several well-known retail brands, including Old Navy, Banana Republic, Athleta, and its flagship label Gap. Across these divisions, results for the fiscal fourth quarter were mixed. The company slightly missed Wall Street expectations for earnings but managed to match analysts’ revenue forecasts.

Based on estimates compiled by the financial data provider LSEG, analysts had expected earnings per share of 46 cents. Gap reported earnings of 45 cents per share. Revenue came in at $4.24 billion, matching consensus projections.

Following the announcement, the company’s stock declined sharply in after-hours trading, falling as much as nine percent as investors reacted to the weaker-than-expected profitability.

For the three-month period ending January 31, Gap reported net income of $171 million, or 45 cents per share. This marked a decline from the same quarter a year earlier, when the company recorded $206 million in profit, or 54 cents per share.

Profitability was also pressured by tariff-related costs. Gross margin during the quarter slipped to 38.1 percent, slightly below market expectations according to data from StreetAccount. Despite the margin pressure, overall revenue still showed modest growth.

Total sales rose to $4.24 billion, representing a roughly two percent increase from $4.15 billion in the same quarter the previous year.

Looking ahead, the company issued guidance that was generally in line with analysts’ forecasts but did not exceed expectations. For the current quarter, Gap expects revenue growth between one percent and two percent, compared with analysts’ projections of roughly two percent growth.

For the full fiscal year, the retailer anticipates sales expansion of between two percent and three percent, aligning closely with the consensus estimate of approximately 2.5 percent growth.

Gap also adjusted its earnings outlook after receiving a $313 million legal settlement during the quarter. Taking this into account, the company expects adjusted earnings per share for the full year to fall between $2.20 and $2.35, compared with the analyst consensus estimate of $2.32.

The company said its forecast does not yet incorporate recent developments related to international tariffs because the policy environment remains uncertain. O’Connell explained that it would be premature to adjust projections until the situation becomes clearer.

Gap had previously faced significant cost pressures linked to global tariffs introduced during the administration of Donald Trump. Those tariffs were later challenged and partially struck down by the Supreme Court of the United States last month.

However, a new tariff framework that imposes a 15 percent rate could potentially benefit the retailer compared with earlier policies that carried higher rates for certain countries.

O’Connell said that if the current tariff rules remain in place through the remainder of the year or expire mid-year, the company’s financial performance could end up stronger than its current forecast suggests. A stable 15 percent tariff rate would likely be slightly lower than the assumptions already built into the company’s internal planning, potentially creating a modest boost to operating income.

These mixed financial results arrive more than two years after Chief Executive Officer Richard Dickson began implementing a broad turnaround strategy aimed at revitalizing the company. Investors and analysts are increasingly expecting stronger performance as the restructuring efforts progress.

Dickson said the company has already made meaningful improvements in profitability and returned to modest growth, while also building up a cash reserve of approximately $3 billion. With those foundations in place, he believes the company is entering the next stage of its transformation.

The new phase, he explained, focuses on sustaining growth and strengthening the brand portfolio through better products, improved marketing, and stronger storytelling around its fashion identity.

Dickson emphasized that disciplined execution has been key to the company’s recovery so far. Continuing that approach, he said, will involve refining product design, sharpening marketing strategies, and strengthening brand narratives to deepen consumer engagement.

In addition to strengthening its core apparel business, Gap is exploring new growth opportunities beyond traditional clothing. The company has begun expanding into categories such as beauty and accessories, and it recently appointed a chief entertainment officer to develop partnerships that connect fashion with entertainment and cultural platforms.

According to Dickson, these initiatives are expected to gain significant momentum beginning next year as the company scales up its new ventures.

A closer look at individual brands within the company reveals varied performance across the portfolio.

Old Navy, the company’s largest brand and a key driver of revenue, recorded a three percent increase in sales, reaching $2.3 billion during the quarter. Comparable sales also rose three percent. While this growth was solid, it fell short of analyst expectations of roughly 4.3 percent.

Despite the shortfall, the company believes Old Navy continues to attract shoppers by offering strong value for money. Gap noted that the brand’s pricing strategy resonates with consumers from a broad range of income groups.

The strongest performance of the quarter came from the company’s namesake brand, Gap. Sales for the brand climbed eight percent to $1.1 billion, while comparable sales increased seven percent. These results significantly exceeded analyst expectations of around 4.6 percent.

Under Dickson’s leadership, the brand has been working to reestablish its cultural relevance. Marketing campaigns and updated product collections appear to be resonating with a diverse customer base, including younger shoppers from Generation Z.

Another bright spot was Banana Republic, which posted its third consecutive quarter of positive comparable sales growth. Comparable sales rose four percent, beating expectations of 2.5 percent.

Overall sales at Banana Republic increased one percent to $549 million. The improvement reflects stronger product offerings and more effective marketing campaigns.

Dickson highlighted several standout categories within the brand’s men’s collection, including traveler pants, cashmere products, and outerwear, all of which performed well during the quarter. He added that women’s merchandise is also becoming more consistent, with strong demand for items such as denim skirts and knit sweaters.

As the company moves into 2026, Dickson said Banana Republic is beginning to regain its momentum and reconnect with customers.

In contrast, Athleta continued to face challenges. The athleisure brand reported an 11 percent decline in revenue to $354 million, while comparable sales dropped 10 percent.

Part of the decline reflects broader softness in the athletic apparel market. However, the company also acknowledged that earlier strategic decisions contributed to the slowdown. These included targeting the wrong consumer segments and introducing product assortments that did not resonate strongly with customers.

Under new leadership, the brand is working to reset its strategy. Efforts are underway to redesign the product lineup, bring back popular items that loyal customers previously favored, and introduce more innovative designs.

Dickson said these changes are part of a broader effort to reposition Athleta and restore growth over the long term as the company refines its brand strategy and reconnects with its core customer base.