The Gap Inc (0ITS.L) Q4 2024 Earnings Report

The Gap Inc delivered a resilient QQ4 2024 performance with top-line growth and meaningful free cash flow generation, despite a contraction in profitability on a year-over-year basis. Revenue rose 11.5% YoY to $4.149 billion, supported by continued strength in brand portfolio and omni-channel demand, while gross margin remained solid at approximately 38.9%. However, operating income declined by about 11.6% YoY to $259 million and net income was flat at roughly $206 million, reflecting a sizable non-operating expense contribution (notably other expenses of $1.353 billion) that compressed operating profitability. Earnings per share (GAAP) stood at $0.53 (diluted $0.54), versus prior year pressure from lower operating leverage and cost dynamics.

Cash flow remained a bright spot: operating cash flow was $616 million, capital expenditures were modest at $117 million, yielding free cash flow of about $499 million for the quarter. The company ended the period with cash and cash equivalents of roughly $2.335 billion and total liquidity that supports ongoing deleveraging and shareholder returns. Balance sheet health remains sturdy, with current assets of $5.203 billion and current liabilities of $3.256 billion, implying a comfortable liquidity buffer (current ratio ~1.6 and quick ratio just below 1). Net debt stood around $3.14 billion, underscoring leverage considerations that management will need to balance against ongoing cash generation.

Strategically, Gap continues to benefit from a diversified brand portfolio (Old Navy, Gap, Banana Republic, Athleta) and a strong e-commerce footprint. The results imply that Athleta and other brands are contributing to growth, while the mix may be exerting margin pressure due to discounting and promotional activity in a volatile macro environment. The company’s capital allocation—share repurchases of $75 million and dividends of $56 million—highlights a shareholder-friendly stance that complements balance-sheet strength. Investors should monitor brand contribution, inventory discipline, and the pace of deleveraging, as these will shape the trajectory toward a more robust profitability profile.”