Citi Lowers The Gap Inc (GAP) Price Target, Keeps Buy Rating

On Friday, May 30, Citi analyst Paul Lejuez lowered the price target for The Gap, Inc. (NYSE:GAP) to $30 from $33 and kept a “Buy” rating. This decision came after the company reported first-quarter fiscal 2025 EPS of $0.51, which beat consensus estimates of $0.46. The better-than-expected EPS was supported by stronger sales and lower selling, general, and administrative expenses (SG&A).

A lifestyle customer wearing the apparel company’s clothing and enjoying the outdoors.

Gap brand comparable sales were up 5%. While this was a solid gain, it was below market expectations. The company’s Old Navy brand grew comparable sales by 3% to surpass both consensus and market projections. According to the analyst, Old Navy is important as it contributes to The Gap, Inc.’s (NYSE:GAP) overall sales and profitability.

The Gap, Inc.’s (NYSE:GAP) management reiterated its fiscal year 2025 guidance without tariffs, forecasting EPS to be between $2.30 and $2.40. However, tariffs are anticipated to add a $100-150 million headwind in the cost of goods sold (COGS) in the second half of the year even after mitigation efforts. This suggests that tariffs lower the guidance to a range of $2.00 to $2.20. Lejuez noted that the tariff assumptions are conservative, assuming only 44% mitigation and no pricing offset.

Lejuez praised The Gap, Inc.’s (NYSE:GAP) strong execution and highlighted consistent sales performance at both Old Navy and Gap, as well as improvements in gross margin and cost control. Despite the Gap brand’s sales not meeting expectations and the challenges posed by tariffs, the analyst believes that The Gap, Inc. (NYSE:GAP) offers an attractive risk/reward balance.

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