Gap, Old Navy, and Banana Republic shoppers still appear to be shelling out for work shirts and gym clothes in spite of rising oil prices, tariff uncertainties, and Middle East tensions.
“We have gone through 55 years of various different challenges that have come our way, tariffs are no different now. They are challenging, and what makes it more challenging is a bit of the uncertainty and changes. But it’s up to businesses like ours to show resilience and agility,” Gap (GAP) CEO Richard Dickson told Yahoo Finance at the Cannes Lions International Festival of Creativity (watch above).
Dickson’s comments come in the wake of a lackluster retail sales report on Tuesday. The Commerce Department said that US retail sales declined more than expected in May. Sales for April were revised lower.
“We haven’t seen a real difference right now in our business,” Dickson said of consumer habits.
But Gap’s stock is down 12% in 2025 as investors fret about retail amid the Trump administration’s tariff war. Shares plunged 20% on May 30 after the company warned that tariffs would inflate its costs and eat into profits.
Read more: What Trump’s tariffs mean for the economy and your wallet
If tariffs stay in place at current levels, it could cost Gap $250 million to $300 million this year. Its full-year guidance does not include this impact, Gap said. The company added it could mitigate about half of the tariff impact, bringing a potential hit to operating income totaling $100 million to $150 million.
Some analysts estimated the impact could equate to a $0.25 hit to earnings per share for the year.
Gap said it has diversified away from China, sourcing less than 3% exiting the year compared to less than 10% in 2024. By the end of 2026, no single country should account for more than 25%. The company is also doubling its vendor sourcing for American-grown cotton in 2026.
Dickson said the uncertain macro conditions could present an opportunity for Gap to gain market share. “We are essentially a value proposition that has style and relevance that today could be more important than ever. As luxury becomes more challenging, that consumer is going to start to look at value propositions with brands that matter,” he added.
The former COO of toymaker Mattel (MAT) has served as Gap’s CEO since August 2023. In the last two years, he’s been leading the retailer toward a surprising turnaround after years of epic stumbles, from terrible product fits to misguided styles.
Dickson has been a constant in Gap, Banana Republic, and Old Navy stores. He has diagnosed habitual issues (clunky website, less-than-cool products, supply chain inefficiencies) that had long plagued the company’s performance and stock price.