GAP INC

The following risk factors appearing in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 have been updated.

Risks Related to Macroeconomic Conditions

Global economic conditions have and could continue to adversely affect our business, financial condition, and results of operations.

Our business is affected by global economic conditions and the related impact on consumer spending worldwide. Global economic conditions have impacted and could continue to impact our business. Some of the factors that may influence consumer spending patterns include higher unemployment levels; pandemics and other health crises; extreme weather conditions and natural disasters; higher consumer debt levels; inflationary pressures; recession or fear of recession; global geopolitical instability (including in Europe and the Middle East); reductions in net worth based on market declines and uncertainty; home foreclosures and reductions in home values; fluctuating interest and foreign currency exchange rates and credit availability; government austerity measures; changes and uncertainties related to government fiscal, monetary, trade, and tax policies including changes in interest rates, duties, tariffs, tax laws, and other restrictions; fluctuating fuel and other energy costs; fluctuating commodity prices; and reduced consumer confidence and general uncertainty regarding the overall future economic environment. Historically, consumer purchases of discretionary items, including our merchandise, generally decline during recessionary periods when disposable income is lower or during other periods of economic instability or uncertainty.

The United States has recently enacted significant changes to its trade policy and imposed or proposed imposing substantial tariffs on imported goods from a number of countries. The imposition of tariffs has resulted in increased market volatility and exacerbated inflationary pressures and recessionary fears, and may negatively impact gross domestic product growth in the United States and other countries, all of which could result in reduced discretionary spending by our customers. The situation regarding U.S. tariffs and trade policies has been fluid and may continue to change. As a result of these dynamics, any future changes to U.S. tariffs or worsening trade tensions between the United States and other countries could adversely affect our sales and results of operations.

Deteriorating economic conditions or geopolitical instability in any of the regions in which we and our franchisees sell our products could reduce consumer confidence and negatively impact consumer spending, and thereby could adversely affect our sales and results of operations. In challenging and uncertain economic environments, we cannot predict whether or when such circumstances may improve or worsen, or what impact, if any, such circumstances could have on our business, financial condition, and results of operations, or on the price of our common stock.

Risks Related to Our Business Operations

Trade matters may disrupt our supply chain.

Our operations are subject to complex trade and customs laws, regulations, and tax requirements. The countries in which our products are manufactured or imported, or may be manufactured or imported in the future, may from time to time impose duties, tariffs, or other restrictions on our imports or adversely change existing restrictions.

The United States has recently enacted significant changes to its trade policy and imposed or proposed imposing substantial tariffs on imported goods from a number of countries. Unless otherwise exempted or subject to a different rate, all imports into the United States are currently subject to a baseline 10 percent reciprocal tariff rate. The United States has also imposed significantly higher individualized reciprocal tariff rates on certain countries with which the United States has the largest trade deficits, including Vietnam (46 percent), Indonesia (32 percent), and many of our other sourcing countries. The higher individualized reciprocal tariff rates are currently paused until July 9, 2025 (or in the case of China, until August 12, 2025), while the United States negotiates with these countries. Imports to the United States from China are also currently subject to an additional 20 percent tariff rate.

In fiscal 2024, approximately 27 percent and approximately 19 percent of our merchandise, by dollar value, was purchased from factories in Vietnam and Indonesia, respectively. In fiscal 2024, less than 10 percent of our merchandise, by dollar value, was purchased from factories in China.

There is currently significant uncertainty about the future relationship between the United States and many other countries with respect to tariffs and trade policies. The situation regarding U.S. tariffs and trade policies has been fluid and may continue to change. This risk may be particularly acute should trade tensions between the United States and other countries continue to worsen, which could result in, among other things, increased tariff rates and other trade restrictions, increased product costs, disruptions in the availability of goods, or a breakdown of international supply chains.

Through enterprise risk management, we continue to evaluate the impact of current and potential tariffs on our supply chain, costs, sales, and profitability, as well as our strategies to mitigate negative impacts. Given the current uncertainty regarding the scope and duration of these tariffs, as well as the potential for additional trade actions by the United States and reciprocal trade actions by other countries, the impact on our business, financial condition and results of operations is unknown but could be material, especially if the higher individualized reciprocal tariff rates on our sourcing countries are maintained or if there is an escalation of tariffs or other trade restrictions. We can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful in whole or in part. To the extent that our supply chain, costs, sales, or profitability are negatively impacted by these tariffs or other trade actions, our business, financial condition and results of operations may be adversely affected.

Our sourcing operations could also be adversely affected by geopolitical and financial instability in our sourcing countries, as well as U.S. or foreign labor strikes, work stoppages, boycotts, or port congestion, resulting in the disruption of trade from our sourcing countries, significant fluctuations in the value of the U.S. dollar against foreign currencies, restrictions on the transfer of funds, or other trade disruptions. Disruptions to our sourcing operations in our sourcing countries could increase the cost or reduce the supply of apparel available to us and adversely affect our business, financial condition and results of operations.

There have been no other material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.