Here’s lawyer-esque boilerplate commentary from Gap’s 10K report for 2025, page 38.
A credit rating of BB+ isn’t great.
For you and I, interest rates are going up.
And if you really want to terrify yourself, listen to this podcast (click here) and learn what happens when the AI bubble pops. Assuming the hosts are correct, which is an assumption.
You can slide on down to page 45 in the 10K document. Sales up two percent. Store sales +1%, Ecommerce sales +4%. A +2 comp in an inflationary environment isn’t really a +2 comp, as you all know. Gross margin was down from 41.3% to 40.8%. Inventory was +7% (oh oh).
If this phrase for fixing the business doesn’t signal a warning sign, I don’t know what does. Again, from page 45.
- “… optimizing our platform to drive scale by advancing capabilities that amplify and enable our brands.”
3% of stores have been closed over the past two years.
Free cash flow is down nearly 20% vs. a year prior.
Now, you’re probably saying to yourself, “Kevin, that’s the 2025 annual report. They’re halfway or more into 2026”. You are correct.
Q2 2026:
Net Sales -2%.
Gross Profit +$390 million due to a recovery of $417 million in tariffs, otherwise down $27 million.
You’re probably paying attention to your metrics as well. Get your business as healthy as you can. It’s possible you’ll experience chaos after the election, followed by the unwinding of the AI bubble over the next two years. Or not. I’d want to be prepared.
