GAP Warns Tariffs Could Cost Up to $150–$300 Million; Stock Drops ~20%

Strong Q1 Performance: GAP reported first-quarter revenue of $3.46 billion (+2%) and earnings per share of $0.51, beating analysts’ average estimates of $0.45/share.

Tariff Cost Risk: New tariffs—30% on Chinese goods and 10% on imports from other countries—could result in $250–$300 million in additional costs for the year. After mitigation (supply-chain shifts, increased U.S. cotton sourcing), the net impact is expected to be $100–$150 million, primarily in the second half of the year.

Stock Reaction: GAP shares plunged around 16–20% in after‑hours trading following the report.

Mitigation Strategy:

• Diversifying production: reducing China exposure to below 3% by end‑2025, and ensuring no single country exceeds 25% of sourcing by end‑2026.
• Investing in U.S. cotton and expanding manufacturing in Vietnam and Indonesia.

Outlook Maintained: Despite tariff pressures, GAP reaffirmed its full-year guidance of 1–2% sales growth and 8–10% operating income increase, excluding tariff impacts.

***Photo Reference: https://fortune.com/2025/05/30/gap-tariffs-costs-shares-dive/***