Barclays lifts Gap stock to Overweight on ’disciplined leadership strategy’
Investing.com -- Barclays upgraded its rating on Gap shares to Overweight, arguing that the retailer’s “disciplined leadership strategy” under CEO Richard Dickson is driving a durable brand recovery and improving momentum across its key banners.
Analyst Adrienne Yih said the company’s focus on product innovation, targeted marketing and tighter execution is beginning to translate into stronger full-price sell-through and healthier margins.
She points to evidence that the turnaround is taking hold, with Gap, Old Navy and Banana Republic benefiting from better product assortments and clearer customer targeting.
The most notable improvement is at the Gap brand, where full-price selling picked up in the third quarter and where the company “notably increased its full price selling with a strengthening connection with the Gen Z/Millennial customer.”
Yih also highlighted the combination of strict inventory control and reinvestment in innovation and marketing, which has supported gross margin improvement.
The analyst acknowledged that tariffs remain a near-term headwind, but said Gap’s focus on mix, pricing and cost discipline should help offset the pressure. Gap now guides to a full-year 2025 (FY25) net tariff impact of $150 million to $175 million, representing 100 to 110 basis points of operating-margin drag.
Even so, the company “does not anticipate incremental operating income declines in FY26 and believes it can offset the full impact over time,” Yih noted. Mitigation efforts include sourcing adjustments, pricing actions and assortment changes.
Earlier concerns that tariffs would overwhelm organic margin drivers have eased following a stronger-than-expected back-to-school and early fall season across the portfolio, she added.
Promotional discipline is improving as well. Gap posted a consolidated promo score of 50/100 in the third quarter, but the Gap brand stood out with a “Better” score of 77/100, helped by the “Better in Denim” campaign that signaled renewed brand strength. Old Navy and Banana Republic maintained “Flat” scores.
Alongside the upgrade, Barclays raised its price target to $30 from $19 and increased its earnings estimates for FY25–FY27, citing accelerating sales and better gross margin expectations.
Yih argues that leadership focus, market-share gains and operational discipline support a multi-year recovery. Although risks remain around price elasticity, consumer demand and promotional intensity, the analyst believes Gap is “executing a disciplined turnaround, elevating its brand and driving sustainable growth.”
