Gap, Inc. (GAP) experienced a sharp 16% plunge in extended trading on Friday, as the apparel retailer's stock tumbled following the release of its quarterly financial results and a downward revision to its full-year sales outlook.

The significant decline was triggered by Gap cutting its fiscal 2026 sales growth forecast to 1%-2%, down from its prior outlook of 2%-3% growth. The company cited underperformance at its largest brand, Old Navy, which accounts for approximately 57% of total sales, as a key factor. Management specifically pointed to weakness in the seasonal women's dress category that failed to resonate with customers, with the issue persisting into the current quarter.

Furthermore, Gap highlighted pressure from budget-strained American consumers who are pulling back on discretionary spending amid macroeconomic uncertainty, with consumer sentiment slumping to a record low in May. While the company raised its full-year adjusted earnings per share forecast, citing an expected $80 million benefit from tariff relief, investors focused on the concerning sales trajectory and challenging consumer environment for apparel retailers.