Gap announced Thursday that the tariffs imposed by President Donald Trump on China and other countries will cost the retailer between $250 million and $300 million this year. The company, which owns brands like Old Navy, Banana Republic, and Athleta, stated that it has strategies in place to mitigate more than half of this impact. Despite these challenges, Gap’s stock dropped 15% in after-hours trading.
Tariff Uncertainty Puts Strain on Gap’s Plans
The uncertainty surrounding Trump’s tariff policies has made it difficult for businesses like Gap to plan effectively. The situation is further complicated by a recent development where a federal appeals court temporarily paused a ruling from the Court of International Trade, which had blocked many of Trump’s tariffs. These ongoing shifts in the tariff landscape have clouded Gap’s optimistic recovery, despite a solid performance in the most recent quarter.
Sales Growth Amid Tariff Pressures
Gap’s same-store sales increased by 2% last quarter, marking its fifth consecutive quarter of growth. However, the ongoing tariff concerns could impact the company’s long-term growth. In an interview with CNBC, CEO Richard Dickson emphasized that while tariffs are a challenge, Gap does not plan to raise prices significantly due to these costs. “Based on what we know today, we do not expect there to be meaningful price increases or impact to our consumer,” Dickson said, signaling the company’s commitment to maintaining competitive pricing.
Other Retailers Respond to Tariff Impact
While Gap is holding off on widespread price hikes, other retailers are already adjusting prices to mitigate the impact of tariffs. Companies like Macy’s, Walmart, Home Depot, and Target have all announced selective price increases in certain categories or brands. Macy’s CEO Tony Spring stated, “We’re making selective price increases in selective brands, selective categories, because we believe the value equation for the customer is still very relevant.” This selective pricing strategy highlights how companies are trying to maintain profitability without alienating customers with broad price hikes.
Future Outlook Amid Tariff Uncertainty
As the tariff landscape remains in flux, Gap’s ability to navigate these challenges will play a key role in its future success. The company’s strategy of mitigating the impact of tariffs through cost-saving measures is a step in the right direction, but with ongoing uncertainty surrounding trade policies, it remains to be seen how the company will adjust moving forward. As of now, Gap remains cautious about raising prices and is focused on balancing growth with customer value.
