Gap Braces for Significant $150M-$175M Tariff Headwind in 2025 While Reaffirming Sales Growth Outlook

Retail behemoth Gap Inc. (GPS) is looking ahead to fiscal year 2025 with a clear understanding of an impending financial challenge: a significant tariff headwind projected to be between $150 million and $175 million. This substantial impact stems primarily from the ongoing Section 301 tariffs on goods imported from China, an issue that continues to reshape global trade dynamics for many companies.

Despite this formidable financial obstacle, the iconic apparel retailer is standing firm on its strategic path and financial health.

In a reassuring move for investors and stakeholders, Gap has decisively reaffirmed its guidance for fiscal year 2024, projecting a net sales growth of 1% to 2%. This steadfast outlook underscores the company's resilience and its proactive measures to navigate a complex economic landscape.

The tariff burden is expected to be more acutely felt in the first half of fiscal year 2025.

Gap's Chief Financial Officer, Katrina O'Connell, elaborated on these projections during a recent conference call, emphasizing the company's comprehensive efforts to mitigate these costs. For years, Gap has been strategically working to de-risk its supply chain, a critical move that involves diversifying its manufacturing base away from China.

While these initiatives have been instrumental in reducing exposure, the lingering effects of the tariffs remain a notable factor for the upcoming fiscal year.

O'Connell highlighted that while the company has made significant progress in reducing its dependency on Chinese production, the tariffs still represent a substantial cost.

She articulated that the current tariff impact for 2025 is largely a continuation of existing duties, rather than new ones, suggesting a predictable yet challenging financial hurdle.

The reaffirmation of the 2024 sales guidance, coupled with the transparent communication about the 2025 tariff headwind, paints a picture of a company actively managing its operational and financial levers.

Gap's ability to maintain its growth projections despite the external tariff pressures speaks to the effectiveness of its strategic planning, brand strength, and ongoing efforts to optimize its global supply chain. As the retail landscape continues to evolve, Gap's methodical approach positions it to adapt and pursue its long-term objectives.