Gap (GAP) Lowers Revenue Outlook, American Eagle (AEO) Warns on Margins as Demand Falters

Gap Inc. (GAP) slashed its full-year revenue forecast and American Eagle Outfitters (AEO) cautioned that gross margins will slide this quarter, triggering a sharp sell-off in premarket trading Friday (May 29, 2026). Gap shares tumbled 15%, while AEO fell 10%, making them the focal point of retail losses. The warnings underscore how stubborn inflation and deteriorating consumer confidence are choking discretionary apparel spending. The U.S. personal consumption expenditures price index recently logged its steepest annual rise in nearly three years, and May consumer sentiment sank to a historic low. Gap pinned the weakness on its flagship Old Navy brand, where women’s seasonal items failed to entice shoppers despite steady traffic. American Eagle said its Aerie intimates and loungewear brand held up, but that couldn’t offset lagging pants sales at its namesake chain, blamed on cool spring weather and shifting fashion trends. Barclays analysts noted the fading impact of high-profile celebrity campaigns and warned of persistent profit pressures. LSEG data show Gap trades at 10.3 times forward earnings, above AEO’s 9.7 and Abercrombie & Fitch’s 7.4, reflecting higher turnaround bets.