Dive Brief:
- Gap Inc. is feeling optimistic about its inventory management efforts and tariff mitigation strategies, according to a March 5 earnings call.
- While the retailer reported a 7% year-over-over increase in inventory levels due to tariff-related costs, its "stringent inventory management practices" helped lower units YoY, EVP and CFO Katrina O’Connell said.
- “Successfully navigating the challenges of a second year of tariff dynamics, we are poised to not only maintain but improve our financial health,” O’Connell said.
Dive Insight:
Gap expected last year’s tariff-related mitigation measures to pay off in 2026. In November, the company touted efforts such as sourcing and production adjustments as well as targeted price hikes.
In its most recent quarter, the retailer said it managed import-duty pressures and expects continued improvement in the upcoming quarters.
Gap expects a net neutral impact in 2026 from tariffs. O’Connell noted that the retailer’s guidance reflects tariffs President Donald Trump imposed under the International Emergency Economic Powers Act, which have since been ruled as illegal by the Supreme Court. The guidance also doesn’t include Trump’s 10% tariff under Section 122.
"If the Section 122 tariffs stay in place for the year or expire in July, we do believe there could be an incremental benefit to our current plans," O'Connell told analysts. "With many scenarios still being debated, we are awaiting more clarity before changing our plans," she added.
Other retailers have also seen their tariff strategies pay off. American Eagle, for instance, was able to offset tariffs through cost savings, stronger operational and sourcing efficiencies, executives said during a March 5 earnings call. Newell Brands is also leveraging its 2025 playbook to combat tariffs in 2026, leaning on sourcing and productivity actions.
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