The holidays have started “strong” and are monitoring potential fares

Holiday shoppers fall into Gap (GAP) early.

“Our holiday season is off to a strong start,” Gap CEO Richard Dickson told Yahoo Finance on Thursday. “It gives us confidence to raise our expectations for the year in terms of sales, gross margin and operating income growth.”

Dickson’s comments follow another quarterly earnings thump. The relatively new CEO is running his playbook of improved marketing, stylish clothes that fit well and better inventory management.

Shares rose 13% in after-hours trading.

However, sales in the third quarter came in light of estimates at Old Navy and Banana Republic. A warmer-than-expected winter has depressed sales of sweaters and jackets across the industry.

Gap’s results and increase in guidance are likely to support the turnaround narrative that has lifted the stock about 16% over the past year ahead of the results.

“We believe management is doing the right things operationally, which keeps us optimistic that Gap can continue to expand margins in fiscal 2025,” Citi analyst Paul Lejuez said in a client note.

Of the 15 sell-side analysts covering Gap, the average price target is $25.59, according to Yahoo Finance data — up 22% from current levels.

A wild card in the Gap investment thesis is the potential new tariffs from the incoming Trump administration.

Dickson noted that only about 10% of Gap’s products come from China, but it remains a key issue that he is watching as it could broadly affect the apparel industry.

“Look, if (tariffs) happen, it would create macroeconomic implications, and that would likely be in the form of additional inflationary pressures on consumers. But it’s also important to note that we have increased flexibility to continue to develop our supply chain , and we want to ensure that we are in the strongest possible position as trends unfold,” explained Dickson.

• Net turnover: +2% year over year to $3.8 billion vs. estimate of USD 3.81 billion (guidance: slightly up)

• Compared sales:

  • Old Navy: unchanged from +1% last year, against +1.3% estimate

  • Banana Republic: -1% compared to -8% last year, against -0.4% estimate

  • Gape: +3% compared to -1% last year, against +2.4% estimate

  • Athlete: +5% compared to -19% last year, against +3.7% estimate

• Gross profit: 42.7% compared to 41.3% last year, against 42.1% estimate

• Diluted EPS: $0.72 vs $0.58 estimate

• No storage bump before holiday: Stock levels fell 2% compared to the previous year.

• Trend watch: Gap’s comparable sales have increased for four consecutive quarters.

• Lots of cash: The company’s total cash flow increased 64% year over year to $2.2 billion.

• Instructions:

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