Despite issuing a profit warning, Gap Inc. is weathering the storm of rising oil prices, geopolitical tensions, and ongoing tariff uncertainty. Shoppers at Gap, Old Navy, and Banana Republic are still spending on workwear and activewear, signaling some resilience in consumer behavior.
“We have gone through 55 years of various different challenges that have come our way, tariffs are no different now. They are challenging, and what makes it more challenging is a bit of the uncertainty and changes. But it’s up to businesses like ours to show resilience and agility,” Gap (GAP) CEO Richard Dickson told Yahoo Finance at the Cannes Lions International Festival of Creativity (watch above).
Dickson’s remarks follow a disappointing U.S. retail sales report released Tuesday, which showed a steeper-than-expected decline in May, with April sales also revised lower.
“We haven’t seen a real difference right now in our business,” Dickson said, downplaying the immediate impact on Gap’s performance.
Still, investor sentiment has soured. Gap shares have dropped 12% in 2025, weighed down by concerns over the Trump administration’s trade policies. On May 30, the stock plunged 20% after the company warned that tariffs would raise costs and pressure profits.
Read more: What Trump’s tariffs mean for the economy and your wallet
Gap estimated that maintaining current tariff levels could cost the company between $250 million and $300 million this year. The company noted its full-year forecast doesn’t account for this added burden, though it believes it can offset about half the cost. That would translate into a hit to operating income of $100 million to $150 million.
Some analysts predict the financial impact could cut $0.25 from earnings per share for the year.
Gap has also worked to reduce its exposure to China, sourcing under 3% of its merchandise there by the end of this year, compared to under 10% in 2024. By the close of 2026, the company expects no single country will represent more than 25% of its supply chain. It’s also increasing its sourcing of U.S.-grown cotton, aiming to double that share by 2026.
Dickson believes the current environment presents an opportunity to grow market share. “We are essentially a value proposition that has style and relevance that today could be more important than ever. As luxury becomes more challenging, that consumer is going to start to look at value propositions with brands that matter,” he said.
Since becoming CEO in August 2023 after serving as COO of Mattel (MAT), Dickson has been steering the company through a notable turnaround. After years of struggles with product missteps and operational inefficiencies, he’s taken a hands-on approach across Gap’s key brands.
Dickson has tackled legacy issues—such as a clunky e-commerce platform and uninspired products—while revitalizing the company’s leadership, including appointing fashion designer Zac Posen as creative director. That move has brought renewed attention and high-fashion credibility to Gap.
Meanwhile, the company has focused on cost-cutting and strengthening its financial position. The efforts are paying off: since Dickson took the helm, Gap shares have doubled, far outperforming the S&P 500’s (^GSPC) 36% gain over the same period.
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