Gap Inc. is demonstrating renewed momentum across its portfolio even as U.S. consumers navigate mounting economic pressures. With spending patterns shifting unevenly across income groups and competitive dynamics intensifying in the retail sector, the company’s latest performance offers early indications that its multiyear turnaround under CEO Richard Dickson is gaining traction. Investor optimism was evident Friday, with Gap shares rising more than 9% after the company reported broad-based gains across key brands and reaffirmed its strategy.

Sales Momentum Builds Across Core Brands

Gap delivered third-quarter revenue of $3.94 billion, rising 3% from a year earlier and surpassing Wall Street expectations. Same-store sales increased 5%, marking the retailer’s seventh consecutive quarter of positive comparable growth—a notable achievement in a retail environment characterized by caution and selective consumer spending. Online revenue rose 2% and now represents roughly 40% of total sales, underscoring the company’s continued strength in digital engagement.

Old Navy, Gap’s largest business, recorded a 6% gain in comparable sales, while the flagship Gap brand posted a 7% increase. Banana Republic added 4% growth, benefiting from ongoing product refinement and elevated merchandising efforts. The primary weakness in the quarter came from Athleta, which saw an 11% decline as the brand continues to recalibrate its assortment and marketing strategy.

Overall, Gap’s gross margins surpassed analyst estimates, helped by reduced discounting and operational efficiencies despite persistent tariff pressure. Analysts at Jefferies and Citi both pointed to disciplined cost control, improved inventory management, and clearer brand identity as key elements of the emerging turnaround.

A Strategy Centered on Brand Relevance and Cultural Reach

CEO Richard Dickson emphasized that the company is “winning with all income cohorts,” reflecting its appeal to budget-conscious shoppers and higher-income consumers alike. This broad resonance is supported by a marketing strategy rooted in cultural alignment and product storytelling—a shift that has helped return core categories such as denim and fleece to consistent growth.

Campaigns including “Better in Denim” featuring girl group Katseye, collaborations with Netflix on “Stranger Things,” and tie-ins with Universal’s “Wicked” illustrate the retailer’s effort to push deeper into pop culture. Gap is also expanding its presence through external platforms such as DoorDash, positioning itself “everywhere our consumer is,” according to Dickson.

Physical retail remains a strategic focus. With 2,500 stores currently, Gap is testing new store models, refining layouts, and selectively closing underperforming locations—approximately 35 planned for this year. These efforts form part of Dickson’s transformation roadmap, which he characterizes as moving from “fixing the fundamentals” into a “building momentum” phase.

Navigating Economic Uncertainty While Positioning for Growth

Despite improving brand metrics and rising investor confidence, risks remain. Lower-income shoppers have begun to moderate spending—a trend closely watched by analysts and retailers alike as inflation lingers and wage growth diverges across income groups. Gap’s performance in the crucial holiday quarter will serve as an important test of the durability of its strategy and its ability to maintain pricing discipline without sacrificing volume.

Looking ahead, Gap’s continued focus on product innovation, category expansion, and operational efficiency will be critical as the company seeks to move into the final “accelerating growth” phase of its turnaround. While macro conditions pose challenges, the retailer’s recent momentum suggests that a sustainable recovery is increasingly within reach.