What Happened?
Shares of clothing and accessories retailer Gap (NYSE: GAP) jumped 3.2% in the afternoon session after strong quarterly results from competitors lifted sentiment across the apparel retail sector.
Fellow retailers Abercrombie & Fitch and Kohl's both reported second-quarter results that exceeded analysts' expectations and raised their full-year financial outlooks for 2025. Kohl's shares, in particular, surged nearly 20% on the news. This positive development for the industry comes as Gap is scheduled to report its own quarterly earnings on Thursday. Adding to the day's optimism, Telsey Advisory Group reiterated its "market perform" rating on Gap's stock, maintaining a price target of $26.00, which implies a potential upside of over 21% from the previous closing price.
After the initial pop the shares cooled down to $22.31, up 3.4% from previous close.
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What Is The Market Telling Us
Gap’s shares are very volatile and have had 20 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 3% on the news that a hotter-than-expected wholesale inflation report fueled concerns about slowing consumer spending.
The market was rattled by a Labor Department report showing the Producer Price Index (PPI), a measure of wholesale inflation, jumped 0.9% in July, significantly exceeding economists' expectations of a 0.2% rise. This was the largest monthly increase since March 2022, reigniting worries that businesses will be forced to pass higher costs on to consumers, who are already showing signs of price sensitivity. This inflation data has fanned concerns that U.S. tariffs on imported goods could start to translate into higher prices for shoppers. The inflation report landed amid growing evidence of consumer caution, with recent reports highlighting that shoppers are cutting back on non-essential spending, seeking out sales, and trading down to cheaper brands.
Gap is down 5.5% since the beginning of the year, and at $22.31 per share, it is trading 22.8% below its 52-week high of $28.89 from May 2025. Investors who bought $1,000 worth of Gap’s shares 5 years ago would now be looking at an investment worth $1,283.
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