Key Moments
- Gap shares fell 15%, while American Eagle dropped 10% in premarket trading after weak full-year guidance.
- Gap cut its annual sales outlook. Meanwhile, American Eagle warned of lower gross margins this quarter.
- Both retailers reported weaker demand in women’s seasonal categories. This hit Gap’s Old Navy and American Eagle’s core brand.
Retail Stocks Fall on Weak Outlooks
Gap Inc and American Eagle Outfitters fell sharply in premarket trading on Friday. Gap dropped 15%, while American Eagle slid 10%.
Investors reacted to weaker forecasts. In addition, both companies signaled softer demand for the year ahead. As a result, sentiment around apparel stocks weakened further.
Gap lowered its full-year sales guidance. This reflects softer demand across its brands. Meanwhile, American Eagle kept its outlook for sales and profit. However, it warned that gross margins will fall in the current quarter.
Consumer Pressure Hits Apparel Demand
Retailers face a tougher macro backdrop. Inflation has risen sharply in the U.S. over the past year. At the same time, consumer confidence has fallen.
As a result, households are spending less on non-essential items. Clothing and accessories are under pressure. This trend is weighing on Gap and American Eagle.
Weakness in Women’s Seasonal Categories
Both companies saw weak demand in women’s seasonal products. This trend hurt overall performance in the latest quarter.
At Gap, the weakness was most visible at Old Navy. The brand struggled with its seasonal women’s range. In particular, several product categories failed to connect with shoppers.
BTIG analysts said, “Old Navy was the key swing factor.” They added that dresses underperformed due to weaker fashion appeal and value perception.
American Eagle Sees Mixed Performance
American Eagle showed uneven results across its brands. Aerie performed well and helped offset some weakness. However, the main American Eagle brand continued to struggle.
Women’s bottoms, especially denim, were under pressure. Changing fashion trends and colder weather weighed on sales.
The company recently launched a new campaign featuring Sydney Sweeney. It followed a previous high-profile marketing push that boosted the stock last year.
However, Barclays noted that marketing spending will stay high in Q2 2026. It also said denim and bottoms have returned to weaker performance.
Analysts added that it may be harder for the brand to repeat earlier campaign-driven gains in the second half of 2026.
Valuation Snapshot
Apparel stocks are trading at relatively low forward valuations based on next 12-month estimates.
| Company | Forward P/E (Next 12 Months) |
|---|---|
| Gap | 10.30 |
| American Eagle | 9.70 |
| Abercrombie & Fitch | 7.43 |
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