GAP INC
For the period ended Nov 1, 2025. Filed Nov 25, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Nov 1, 2025 · Filed Nov 25, 2025
GAP$21.48-4.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-08-02; filed 2025-08-29.
0000039911-25-000111
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-11-01; filed 2025-11-25.
0001628280-25-053934
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 79 previous paragraphs and 79 current paragraphs.
47 unchanged; 27 reworded; 5 added; 5 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
Our net sales increased $113 million, or 3 percent, during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, and increased $193 million, or 2 percent, during the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024, driven primarily by an increase in Comp Sales across all brands except for Athleta Global.
Current report
Cost of goods sold and occupancy expenses increased 0.3 percentage points as a percentage of net sales in the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024.
Current report
•Cost of goods sold increased 0.8 percentage points as a percentage of net sales in the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024, primarily driven by the impact of tariff costs in the third quarter of fiscal 2025, partially offset by less promotional activity at all brands except Athleta Global.
Current report
Operating expenses increased $56 million, or 0.5 percentage points as a percentage of net sales during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, primarily driven by an increase due to the timing of performance-based compensation and an increase in strategic investments.
Current report
Operating expenses increased $6 million, but decreased 0.5 percentage points as a percentage of net sales during the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024, primarily due to an increase in net sales while maintaining overall operating discipline.
Removed paragraphs (5)
Previous report
Our net sales increased $5 million during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024, driven primarily by an increase in Comp Sales, offset by incremental income in the second quarter of fiscal 2024 related to the revenue sharing arrangement from our credit card agreement. Our net sales increased $80 million, or 1 percent, during the first half of fiscal 2025 compared with the first half of fiscal 2024, driven primarily by an increase in online sales.
Previous report
Cost of goods sold and occupancy expenses increased 1.4 percentage points as a percentage of net sales in the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024.
Previous report
•Cost of goods sold increased 1.5 percentage points as a percentage of net sales in the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024, primarily driven by incremental income during the second quarter of fiscal 2024 related to the revenue sharing arrangement from our credit card agreement. The estimated impact of tariff increases was minimal for the second quarter of fiscal 2025.
Previous report
Operating expenses decreased $46 million, or 1.3 percentage points as a percentage of net sales during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024, and decreased $50 million, or 1.1 percentage points as a percentage of net sales during the first half of fiscal 2025 compared with the first half of fiscal 2024, primarily due to a decrease in performance-based compensation.
Previous report
On July 4, 2025, the OBBBA was enacted in the United States. The OBBBA changes existing U.S. income tax law and includes numerous provisions that affect corporations, such as permanently extending certain expiring provisions from the Tax Cuts and Jobs Act, modification of the international tax framework, and restoration of favorable tax treatment for certain business provisions such as bonus depreciation and Section 174 research and experimentation expensing. The legislation has multiple effective dates, with certain provisions effective in fiscal 2025 and others implemented through fiscal 2027.
Reworded paragraphs (27)
Previous wording
Financial results for the second quarter of fiscal 2025 are as follows:
Current wording
Financial results for the third quarter of fiscal 2025 are as follows:
Previous wording
•Net sales for the second quarter of fiscal 2025 were flat compared with the second quarter of fiscal 2024.
Current wording
•Net sales for the third quarter of fiscal 2025 increased 3 percent compared with the third quarter of fiscal 2024.
Previous wording
•Store and franchise sales for the second quarter of fiscal 2025 decreased 1 percent compared with the second quarter of fiscal 2024, and online sales for the second quarter of fiscal 2025 increased 3 percent compared with the second quarter of fiscal 2024.
Current wording
•Store and franchise sales for the third quarter of fiscal 2025 increased 3 percent compared with the third quarter of fiscal 2024, and online sales for the third quarter of fiscal 2025 increased 2 percent compared with the third quarter of fiscal 2024.
Previous wording
•Gross profit for the second quarter of fiscal 2025 was $1.54 billion compared with $1.58 billion for the second quarter of fiscal 2024. Gross margin for the second quarter of fiscal 2025 was 41.2 percent compared with 42.6 percent for the second quarter of fiscal 2024.
Current wording
•Gross profit for the third quarter of fiscal 2025 was $1.67 billion compared with $1.64 billion for the third quarter of fiscal 2024. Gross margin for the third quarter of fiscal 2025 was 42.4 percent compared with 42.7 percent for the third quarter of fiscal 2024.
Previous wording
•Operating income for the second quarter of fiscal 2025 was $292 million compared with $293 million for the second quarter of fiscal 2024.
Current wording
•Operating income for the third quarter of fiscal 2025 was $334 million compared with $355 million for the third quarter of fiscal 2024.
Previous wording
•The effective income tax rate for the second quarter of fiscal 2025 was 27.0 percent compared with 30.4 percent for the second quarter of fiscal 2024.
Current wording
•The effective income tax rate for the third quarter of fiscal 2025 was 30.0 percent compared with 24.1 percent for the third quarter of fiscal 2024.
Previous wording
•Net income for the second quarter of fiscal 2025 was $216 million compared with $206 million for the second quarter of fiscal 2024.
Current wording
•Net income for the third quarter of fiscal 2025 was $236 million compared with $274 million for the third quarter of fiscal 2024.
Previous wording
•Diluted earnings per share was $0.57 for the second quarter of fiscal 2025 compared with $0.54 for the second quarter of fiscal 2024.
Current wording
•Diluted earnings per share was $0.62 for the third quarter of fiscal 2025 compared with $0.72 for the third quarter of fiscal 2024.
Previous wording
•Merchandise inventory as of the second quarter of fiscal 2025 increased 9 percent compared with the second quarter of fiscal 2024.
Current wording
•Merchandise inventory as of the third quarter of fiscal 2025 increased 5 percent compared with the third quarter of fiscal 2024.
Previous wording
Macroeconomic factors, including uncertainty surrounding global geopolitical instability, inflationary pressures, foreign currency fluctuations, and changes in interest rates, duties, tariffs, tax laws, and other restrictions as a result of government fiscal, monetary, trade, and tax policies, continue to create a complex and challenging retail environment. The United States has recently enacted significant changes to its trade policy and imposed substantial tariffs on imported goods from a number of countries. Uncertainty surrounding changes in U.S. trade policy and tariffs is contributing to overall macroeconomic volatility. The Company continues to monitor the expected outcome of the trade policy which has increased the cost of our merchandise and therefore may negatively impact our gross margins in future quarters. The Company also continues to evaluate potential mitigating actions including adjustments to our sourcing, manufacturing, assortments, and pricing.
Current wording
Macroeconomic factors, including uncertainty surrounding global geopolitical instability, inflationary pressures, foreign currency fluctuations, and changes in interest rates, duties, tariffs, tax laws, and other restrictions as a result of government fiscal, monetary, trade, and tax policies, continue to create a complex and challenging retail environment. The United States has recently enacted significant changes to its trade policy and imposed substantial tariffs on imported goods from a number of countries. The ongoing impact of increased tariff rates and uncertainty surrounding changes in U.S. trade policy are contributing to overall macroeconomic volatility. The higher tariff rates increased cost of goods sold during the third quarter of fiscal 2025 and are expected to impact our gross margins in future quarters. The Company continues to monitor the impact of the current trade policy while we continue to pursue mitigating actions including adjustments to our sourcing, manufacturing, assortments, and pricing.
Previous wording
The macroeconomic environment has had and may continue to have an impact on consumer behavior, and we anticipate continued uncertainty related to the macroeconomic environment during fiscal 2025. We will continue to monitor macroeconomic conditions and evaluate potential mitigating actions. For additional information on risks related to macroeconomic conditions and our supply chain, see the section entitled “Risk Factors—Risks Related to Our Business Operations—Trade matters, including the impact of current or potential tariffs by the United States, may disrupt our supply chain and adversely affect our business, financial condition, and results of operations” in Part II, Item 1A, Risk Factors, of this Form 10-Q, and the section entitled “Risk Factors—Risks Related to Macroeconomic Conditions—Global economic conditions have and could continue to adversely affect our business, financial condition, and results of operations” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2025.
Current wording
The macroeconomic environment has had and may continue to have an impact on consumer behavior, and we anticipate continued uncertainty related to the macroeconomic environment during fiscal 2025. We will continue to monitor macroeconomic conditions and evaluate mitigating actions. For additional information on risks related to macroeconomic conditions and our supply chain, see the section entitled “Risk Factors—Risks Related to Our Business Operations—Trade matters, including the impact of current or potential tariffs by the United States, may disrupt our supply chain and adversely affect our business, financial condition, and results of operations” in Part II, Item 1A of this Quarterly Report on Form 10-Q, and the section entitled “Risk Factors—Risks Related to Macroeconomic Conditions—Global economic conditions have and could continue to adversely affect our business, financial condition, and results of operations” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2025.
Previous wording
•Cost of goods sold increased 0.7 percentage points as a percentage of net sales in the first half of fiscal 2025 compared with the first half of fiscal 2024, primarily due to higher promotional activity at Athleta.
Current wording
•Cost of goods sold increased 0.7 percentage points as a percentage of net sales in the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, primarily driven by the impact of tariff costs, partially offset by less promotional activity at all brands except Athleta Global.
Previous wording
•Occupancy expenses decreased 0.1 percentage points as a percentage of net sales in the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024, primarily driven by an increase in online sales without a corresponding increase in occupancy expenses.
Current wording
•Occupancy expenses decreased 0.4 percentage points as a percentage of net sales in the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024, primarily driven by an increase in Comp Sales without a corresponding increase in occupancy expenses.
Previous wording
Cost of goods sold and occupancy expenses increased 0.4 percentage points as a percentage of net sales in the first half of fiscal 2025 compared with the first half of fiscal 2024.
Current wording
Cost of goods sold and occupancy expenses increased 0.4 percentage points as a percentage of net sales in the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024.
Previous wording
•Occupancy expenses decreased 0.3 percentage points as a percentage of net sales in the first half of fiscal 2025 compared with the first half of fiscal 2024, primarily driven by an increase in online sales without a corresponding increase in occupancy expenses.
Current wording
•Occupancy expenses decreased 0.4 percentage points as a percentage of net sales in the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024, primarily driven by an increase in online sales without a corresponding increase in occupancy expenses.
Previous wording
Uncertainty surrounding changes in U.S. trade policy and tariffs is contributing to overall macroeconomic volatility. The Company continues to monitor the expected outcome of the trade policy which will increase cost of goods sold and therefore may negatively impact our gross margins in future quarters.
Current wording
The ongoing impact of increased tariff rates and uncertainty surrounding changes in U.S. trade policy are contributing to overall macroeconomic volatility. The Company continues to monitor the impact of the higher tariff rates which have increased cost of goods sold in the third quarter of fiscal 2025 and are expected to impact our gross margins in future quarters.
Previous wording
Interest income was flat during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 and increased slightly during the first half of fiscal 2025 compared with the first half of fiscal 2024, primarily due to higher cash balances, partially offset by lower interest rates.
Current wording
Interest income decreased $3 million during the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024 primarily due to lower interest rates, partially offset by higher cash balances. Interest income was relatively flat during the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024.
Previous wording
The decrease in the effective tax rate for the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 is primarily due to prior year increases to certain income tax reserves, as well as changes in the amount and mix of jurisdictional earnings.
Current wording
The increase in the effective tax rate for the third quarter of fiscal 2025 compared with the third quarter of fiscal 2024 is primarily due to the cumulative impact of a change in the Company's estimated annual effective tax rate and changes in the amount and mix of jurisdictional earnings.
Previous wording
The decrease in the effective tax rate for the first half of fiscal 2025 compared with the first half of fiscal 2024 is primarily due to prior year increases to certain income tax reserves and changes in the amount and mix of jurisdictional earnings, partially offset by less favorable impacts of stock-based compensation.
Current wording
The increase in the effective tax rate for the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024 is primarily due to changes in the amount and mix of jurisdictional earnings and less favorable impacts of stock-based compensation, partially offset by prior year increases to certain income tax reserves.
Previous wording
The Company included the impact of the OBBBA tax legislation in the second quarter of fiscal 2025, the period of enactment, and the impact was not material to the Condensed Consolidated Financial Statements.
Current wording
On July 4, 2025, the OBBBA was enacted in the United States. The Company included the impact of the OBBBA tax legislation in the second quarter of fiscal 2025, the period of enactment, and the impact was not material to the Condensed Consolidated Financial Statements.
Previous wording
In addition to our cash flows from operating activities, our primary sources of liquidity include cash and cash equivalents, short-term investments, and our ABL Facility. As of August 2, 2025, we had cash and cash equivalents of $2.19 billion and short-term investments of $238 million. We hold our cash, cash equivalents, and short-term investments across a diversified set of reputable financial institutions and monitor the credit standing of those financial institutions. In addition, we are also able to supplement near-term liquidity, if necessary, with our ABL Facility or other available market instruments. There were no borrowings under the ABL Facility as of August 2, 2025. See Note 4 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on our debt and credit facilities.
Current wording
Our primary sources of liquidity include cash and cash equivalents, short-term investments, and our ABL Facility. As of November 1, 2025, we had cash and cash equivalents of $2.26 billion and short-term investments of $255 million. We hold our cash, cash equivalents, and short-term investments across a diversified set of reputable financial institutions and monitor the credit standing of those financial institutions. In addition, we are also able to supplement near-term liquidity, if necessary, with our ABL Facility or other available market instruments. There were no borrowings under the ABL Facility as of November 1, 2025. See Note 4 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on our debt and credit facilities.
Previous wording
Net cash provided by operating activities decreased $271 million during the first half of fiscal 2025 compared with the first half of fiscal 2024, primarily due to the following:
Current wording
Net cash provided by operating activities decreased $263 million during the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024, primarily due to the following:
Previous wording
•a decrease of $96 million related to merchandise inventory primarily due to timing of receipts and higher inventory cost during the first half of fiscal 2025.
Current wording
•a decrease of $133 million related to accounts payable primarily due to timing of payments for merchandise inventory during the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024; and
Previous wording
•a decrease of $156 million related to accrued expenses and other current liabilities primarily due to higher payments for fiscal 2024 performance-based compensation made during the first half of fiscal 2025 as well as a decrease in the current period performance-based compensation; and
Current wording
•a decrease of $97 million related to accrued expenses and other current liabilities primarily due to higher payments for fiscal 2024 performance-based compensation made during the first three quarters of fiscal 2025 as well as a decrease in current performance-based compensation.
Previous wording
Net cash used for investing activities decreased $261 million during the first half of fiscal 2025 compared with the first half of fiscal 2024, primarily due to $260 million fewer net purchases of short-term investments.
Current wording
Net cash used for investing activities decreased $249 million during the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024, primarily due to $246 million fewer net purchases of short-term investments.
Previous wording
Net cash used for financing activities increased $168 million during the first half of fiscal 2025 compared with the first half of fiscal 2024, primarily due to $152 million in repurchases of common stock during the first half of fiscal 2025 compared with no repurchases during the first half of fiscal 2024.
Current wording
Net cash used for financing activities increased $165 million during the first three quarters of fiscal 2025 compared with the first three quarters of fiscal 2024, primarily due to $152 million in repurchases of common stock during the first three quarters of fiscal 2025 compared with no repurchases during the first three quarters of fiscal 2024.
Previous wording
We paid a dividend of $0.165 per share during the second quarter of fiscal 2025. In August 2025, the Board authorized a dividend of $0.165 per share for the third quarter of fiscal 2025.
Current wording
We paid a dividend of $0.165 per share during the third quarter of fiscal 2025. In November 2025, the Board authorized a dividend of $0.165 per share for the fourth quarter of fiscal 2025.