Gap Stock Tumbles As Tariffs Threaten Its Turnaround Plans: Analysts Flag Headwinds Despite Strong Q1

The apparel maker expects Q2 revenue to be flat year-on-year, while for the rest of the fiscal year 2025, the firm believes Trump’s tariffs could result in a $100 million hit to its operating income.

Shares of Gap Inc. (Gap) tumbled 20% on Friday morning after the company flagged tariffs as a potential source of concern for its bottom line in 2025.

Gap reported earnings per share (EPS) of $0.51, beating Wall Street expectations of $0.44. Its revenue for the first quarter (Q1) stood at $3.46 billion, ahead of an estimated $3.42 billion.

In its guidance for the second quarter, the apparel maker said it expects revenue to be flat year-on-year. For the rest of the fiscal year 2025, Gap said Trump’s tariffs could result in a $100 million hit to its operating income.

It estimated a 10% growth in operating income if the impact of Trump’s tariffs were to be ignored.

The company also flagged a potential increase of up to $300 million in costs due to imports becoming costlier–a side effect of President Trump’s tariff war. 

This drew a slew of price target cuts from analysts, who warned that Gap’s margins could take a hit, according to TheFly.

Analysts at Barclays gave a nod to Gap’s strong Q1 showing, but trimmed the price target to $32 from $33, noting that the company’s tariff warning could result in some weakness in the stock. In turn, this would present a buying opportunity for investors, the brokerage said, while maintaining its ‘Overweight’ rating.

Citi analysts trimmed their price target to $30 from $33, noting that the company could be in the “penalty box near-term” due to the Gap brand falling short of expectations and its tariff guidance spooking investors. The firm has a ‘Buy’ rating on the stock.

Analysts at UBS highlighted that Gap has had to model larger-than-expected headwinds in the second half of 2025, and that uncertainty around consumer spending, along with tariffs, could keep the stock range-bound. 

It trimmed the price target on the stock to $27 from $29, while keeping a ‘Neutral’ rating on the shares.

Gap’s stock has declined 6.24% year-to-date and 1.62% over the past 12 months.

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