Gap Inc. (GAP) Q2 2026 (USD): Adj. EPS 0.52 (exp. 0.48), Revenue 3.65bln (exp. 3.69bln), Comp. sales -1%

• Got refunds of USD 95mln and related interest Income of USD 5mln in Q2, with remaining refunds & related interest income expected in Q3.
• In Q2, recorded USD 417mln adjustment to cost of goods sold related to net IEEPA tariff recovery.

• FY net sales +1-1.5% (prev. +1-2%).
• FY adj. EPS 2.35-2.45 (prev. 2.30-2.40).
• Q3 net sales +1.5-2.5%.
• Q3 gross margin up 25-75bps.

The headline beat and miss here are both distorted by one-off tariff recovery items, and the established pattern with prints of this kind is that the market initially keys on the EPS beat, then fades it as the quality of earnings work isolates the non-operating component. A large adjustment to cost of goods sold tied to tariff recovery, plus refund and interest income with more expected next quarter, means the adjusted EPS line is carrying items that do not reflect underlying trading, so the cleaner read is the revenue miss against a negative comparable sales print. The guidance split matters more than the quarter: the sales range being trimmed at the top end while the EPS range is raised implies the upgrade is coming from cost recovery and margin rather than demand, a combination that has historically been rewarded only briefly in apparel names unless comps inflect. The actor context is the broader tariff-recovery cycle, in which retailers that paid duties have been booking recoveries unevenly across periods, making quarter-on-quarter comparability poor. The follow-ons are management commentary on how much recovery remains in the back half, whether the comp trajectory supports the implied second-half sales ramp, and how peers' margin lines absorb the same tariff pass-through.