Gap raised its annual profit forecast on Thursday as strong momentum at its namesake brand helped offset weakness across other major labels. The update highlights an uneven recovery in U.S. discretionary retail, where consumers remain selective but brands with stronger product relevance are still managing to generate sales growth despite broader economic and tariff-related pressures.

Namesake Brand Extends Its Growth Streak

Gap’s core brand delivered the clearest evidence of improving consumer demand, recording a 10% increase in comparable sales in the second quarter ended August 1. That marked the tenth consecutive quarter of comparable-sales growth and exceeded the 8.8% increase expected by analysts, according to LSEG data.

The performance suggests that Gap’s efforts under CEO Richard Dickson to refresh merchandise and increase marketing are gaining traction. The company has focused on products aligned with current consumer trends while attempting to rebuild brand relevance following years of inconsistent demand. The sustained growth at the namesake label indicates that those efforts are producing measurable results, although performance across the broader portfolio remains uneven.

Old Navy and Athleta Highlight the Uneven Recovery

The weakness at Gap’s other brands remains a significant counterweight. Comparable sales at Old Navy fell 4% in the quarter, reversing a 2% increase a year earlier. Athleta performed even more weakly, with comparable sales declining 12% following a 9% decline in the previous year.

Old Navy is particularly important because of its scale within Gap’s portfolio. The appointment of company insider Michael Francis as its new CEO represents another effort to accelerate the brand’s turnaround. His mandate will be closely watched as Gap attempts to address weaker demand while maintaining the broader momentum generated by its namesake business.

Profit Beats Expectations Despite Revenue Miss

Gap’s financial results presented a mixed picture. Revenue declined 2% to $3.65 billion, narrowly below the approximately $3.69 billion analysts had expected. Adjusted earnings, however, came in at 52 cents per share, ahead of the 48-cent consensus estimate.

The earnings performance helped support the company’s decision to raise its annual profit outlook, even though its sales forecast became slightly more cautious. Gap now expects fiscal 2026 sales growth of between 1% and 1.5%, compared with its previous forecast of 1% to 2%. Analysts had estimated approximately 1.1% growth.

Retail Outlook Remains Sensitive to Consumer and Policy Risks

Gap said its revised outlook incorporates consumer trends as well as the broader economic and geopolitical environment, while recognizing risks from energy prices and U.S. tariffs. Those factors remain important for apparel retailers because higher costs can affect both household purchasing power and merchandise margins.

The company’s next phase will therefore depend on whether the namesake brand can maintain its double-digit sales momentum while management stabilizes Old Navy and Athleta. The stronger earnings result provides evidence of progress, but the contrasting performance among the brands shows that the recovery is not yet broad-based. Investors will be watching upcoming quarters for signs that Gap’s brand turnaround can translate into sustained portfolio-wide growth without relying disproportionately on its namesake label.