Clothing retailer Gap beat forecasts after a viral ad. Shares rose 10%

The Better in Denim viral campaign helped clothing retailer Gap, which owns Old Navy, Banana Republic and Athleta in addition to its namesake brand, beat sales expectations and raise its full-year forecast. Strong quarterly results and an influx of young shoppers supported the retailer's shares, as they jumped 10%. Analysts at Barclays and Jefferies upgraded their recommendations on Gap shares before the results were released, seeing upside potential of 30%.

Gap's comparable sales were up 5% year-over-year, and Gap's flagship brand saw a 7% increase. Excluding the jump during the pandemic, this is the strongest growth in Gap's comparable sales since the 2017 holiday quarter - and it's well above Wall Street expectations of 3.1%, CNBC writes, citing StreetAccount. In addition, the figure for all Gap brands remained in the plus side for the seventh consecutive quarter, the network notes.

The Better in Denim viral ad campaign featuring female music group Katseye, which was released this summer, contributed to the success, Business Insider reports. It became a huge hit on social networks and led to significant sales, the publication quotes Gap CEO Richard Dixon.

"With more than 8 billion impressions and 500 million views, Better in Denim has become a global cultural phenomenon and one of the brand's most successful campaigns of all time, driving significant traffic growth and double-digit growth in denim sales," Dixon said for the third quarter ended Nov. 1 (quoted in Business Insider).

The ads have attracted even more attention amid the "denim war," the publication notes, with several brands at once, including American Eagle and Lucky Brand, releasing their own colorful campaigns to promote jeans.

The ads have helped attract members of Generation Z, whom he described as "highly engaged," while wealthier shoppers are attracted to the chain due to its strong competitive position "between premium and mass-market," the Gap CEO added.

Gap shares were up nearly 10% in trading on Nov. 21, with the price hitting $25.3. This is the maximum since Ma. However, compared to the beginning of 2025, the securities are now only 7% more expensive.

Earnings per share came in at $0.62 versus LSEG analysts' expectations of $0.59 cents, CNBC reported. Revenue reached $3.94 billion, while analysts predicted $3.91 billion. The company's net income fell almost 14% year-over-year to $236 million, mainly due to duties, CFO Katrina O'Connell told CNBC.

For the full fiscal year, which ends in early February, Gap raised the lower end of its previously stated range: sales should grow 1.7-2%, in line with analysts' expectations. Gap had previously forecast sales growth of 1-2%. The clothing retailer also expects an operating margin of about 7.2% for the year, while earlier the forecast was 6.7% to 7%. The forecast takes into account the impact of duties, which is estimated at 1-1.1 percentage points.

Barclays on November 17 raised its recommendation on shares of Gap from "hold" (Equalweight rating) to "buy" (Overweight) and raised its target price from $19 to $30. Its target assumes growth of securities price by 30%.

Jefferies on Nov. 14 upgraded the recommendation from Neutral (Hold) to Buy and raised the target price from $22 to $30, which also implies a 30% upside to the stock.

Of the 19 analysts covering the apparel retailer's securities, 10 advise "hold" them and nine advise "buy."

This article was AI-translated and verified by a human editor