San Francisco — Gap Inc. reported fiscal second-quarter earnings that fell short of expectations on Thursday, though Banana Republic showed signs of recovery, indicating a positive shift for the brand. As consumers navigate changing preferences, the specialty apparel retailer’s overall comparable sales saw a modest increase of 1 percent, which underperformed compared to the anticipated 1.9 percent growth.

The company, which oversees well-known brands such as Old Navy, Athleta, and its flagship Gap label, experienced a bittersweet quarter. While slightly better than expected earnings per share of 57 cents saw improvements from last year’s figures, overall revenue of $3.73 billion narrowly missed projections. Following the announcement, Gap’s stock took a hit, dropping over 5 percent in after-hours trading.

Athleta, Gap’s athleisure line, notably underperformed, posting a 9 percent decline in comparable sales. This prompted CEO Richard Dickson to express disappointment, stating the brand had shifted focus away from its core customer base while attempting to attract new shoppers. “It’s a year of reset for us,” he remarked, acknowledging the need to re-establish connections with loyal consumers.

In a bid to recalibrate its strategy, Gap has introduced Maggie Gauger, a former Nike executive, as Athleta’s new CEO. This marks the third leadership change for the brand within just two years, reflecting the urgency for revitalization.

Gap’s financial report included a net income of $216 million for the quarter, a slight rise from $206 million last year. The company reaffirmed its fiscal 2025 sales growth projection, expecting an increase of 1 to 2 percent, aligning closely with analyst forecasts.

Among the brands, Old Navy, Gap’s cornerstone, reported revenue of $2.2 billion, a 1 percent year-over-year increase. It also enjoyed a 2 percent rise in comparable sales, slightly shy of expectations. The Gap label itself saw net sales of $772 million, up 1 percent, while Banana Republic posted a net of $475 million, despite a slight year-over-year decline in sales.

Despite these fluctuations, Gap is taking steps to mitigate the increasing cost of imports due to tariffs. Initially expecting tariff impacts of up to $150 million, the company now anticipates costs rising to between $150 million and $175 million. As Dickson noted, the company is actively adjusting supplier agreements and sourcing strategies to navigate these financial pressures.

In an effort to enhance its brand image and reconnect with consumers, Gap recently launched the “Better in Denim” campaign, featuring popular music. This initiative has resonated, garnering millions of views and becoming a trending topic on social media platforms like TikTok. Dickson highlighted this evolution, stating, “Gap is a pop culture brand that’s telling great stories and driving meaningful initiatives.”

However, as Gap strives to regain its footing in a competitive retail environment, it faces heightened expectations from analysts. The company’s gross margin stood at 41.2 percent, falling short of the forecasted 41.9 percent, underscoring the challenges it continues to face despite its efforts to innovate.

As the pipeline of new strategies unfolds, Gap must navigate diverse consumer demands and market pressures while working to solidify its recovery across all brands, especially during this pivotal year of transformation.