Baird believes that Gap’s brand reinvigoration efforts are delivering tangible results. The investment bank upgraded the retail stock to an outperform rating from neutral. It also lifted Gap’s price target to $33 from $27, which implies a gain of about 22% from Tuesday’s close. Baird analyst Mark Altschwager made the case that Gap’s brand reinvigoration strategies of Old Navy and Gap are proving sustainable, with real results. Consistent market share gains at Old Navy highlight that its fashion mix resonates with consumers, while customer acquisition and average unit retail has fueled Gap’s turnaround. GAP YTD mountain GAP YTD chart “Overall, with brand and share momentum at the two largest banners, consensus F2026 comp estimates (+2.7%) look achievable, with room for upside as product and marketing initiatives gain steam,” he wrote, adding that Banana Republic and Athleta remain in earlier turnaround stages. At the same time, customers are still “spending where they see value” despite remaining cautious. Altschwager sees the discretionary spending backdrop picking up in 2025. “We think GAP is well positioned to capture benefits from any macro tailwinds in 2026 (strong value proposition, increasing cultural relevance among consumers),” he said. Meanwhile, margin execution remains “impressive” at Gap, Altschwager wrote. He applauded the company’s significant profitability recovery that saw its gross margins expand to 41.3% in the fiscal 2024 year from 38.8% in its fiscal 2023 years. These changes, he said, were “driven by structural improvements in product relevance, inventory discipline, sourcing efficiencies, and real estate optimization.” “Looking to F2026, we expect expansion to resume, supported by structural factors, ramping tariff mitigation (management committed to no incremental EBIT pressure from tariffs), and easier Athleta comparisons (cycling heavy markdowns in FQ2),” he added. “Additionally, efficiency initiatives in marketing and technology, combined with sales growth, present a clear path to SG & A leverage.” Shares of Gap have added 15% this year. They ticked more than 2% higher.
