What Happened?
Shares of clothing and accessories retailer Gap (NYSE: GAP) fell 20.3% in the afternoon session after the company reported underwhelming first-quarter 2025 results.
On a headline basis, the company maintained previously-provided full-year guidance but added that "The below fiscal 2025 outlook does not reflect the potential effect of tariffs, which are currently 30% on imports from China and 1% on most imports from other countries. If these tariff rates remain, they could result in a gross estimated incremental cost of approximately $250 million to $300 million."
The comment likely raised uncertainty which markets don't like. On a more positive note, GAP beat on revenue and EPS. Still, this was a weaker quarter.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Gap? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Gap’s shares are very volatile and have had 25 moves greater than 5% over the last year. But moves this big are rare even for Gap and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was about 2 months ago when the stock dropped 22.2% as President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10%.
From clothing brands and electronics makers to the e-commerce sites that move their goods, companies built on global supply chains took the biggest hit. Stocks with heavy exposure to Asia were especially hard-hit, as the new tariffs threatened the growth and profits of firms with factories in the region. Vietnam, central to many companies' production plans, faced a 46% tariff. Cambodia and Indonesia were also in the crosshairs, with tariff rates of 49% and 32%.
These measures could significantly erode the competitiveness of goods produced in those regions. For example, reduced production volumes would negatively affect the sales growth of all companies benefiting from these manufacturing hubs.
Gap is down 5.2% since the beginning of the year, and at $22.39 per share, it is trading 22.9% below its 52-week high of $29.03 from June 2024. Investors who bought $1,000 worth of Gap’s shares 5 years ago would now be looking at an investment worth $2,264.
Do you want to know what moves the business you care about? Add them to your StockStory watchlist and every time a stock significantly moves, we provide you with a timely explanation straight to your inbox. It’s free and will only take you a second.
