Gap stock slips after Jefferies downgrade on Old Navy concerns

Gap stock slips after Jefferies downgrade on Old Navy concerns

Wed, August 12, 2026 at 7:58 PM GMT+3 2 min read

• GAP +0.69%

Gap Inc (NYSE:GPS) shares fell 3.8% on Wednesday after Jefferies downgraded the retailer to "Hold" from "Buy," citing growing concerns over softening trends at its Old Navy division.

The brokerage cut its price target to $23, rolling forward a roughly 9x price-to-earnings multiple on its fiscal 2028 earnings estimate of $2.56 per share.

"We are increasingly concerned about softer trends at Old Navy (data pointing to higher promos & weakening survey metrics)," analysts wrote.

"Importantly, 2Q represents the easiest comparison of the year, yet trends have lagged;;;and only become tougher in 2H."

Gap guided to low-single-digit percentage comp growth for Old Navy in the quarter, while Jefferies is modeling a 4% decline.

Comparisons get tougher in the back half of the year, with Old Navy lapping a 6% comp gain in the third quarter and a 3% gain in the fourth, according to the note.

Morning Consult survey data cited by Jefferies showed purchase consideration for Old Navy fell 13% year-over-year in July and has weakened sequentially in recent months, while value perception has also deteriorated. The analysts said discounting has increased at the brand alongside several months of pressure on average selling prices. "We are concerned these trends could persist longer than anticipated," they wrote.

Still, Jefferies said it remains encouraged by the turnaround underway at the Gap brand itself under CEO Richard Dickson, pointing to nine consecutive quarters of positive comps and strong sell-through from initiatives including the Gap x Hailey Bieber partnership. The firm also cited early customer engagement with Gap's beauty and accessories rollout, including fragrance products that have sold out online, though it said it no longer expects a low-single-digit percentage lift to 2027 sales and EBITDA from those initiatives.