By Sabrina Escobar

Gap CEO Richard Dickson is betting on cosmetics and accessories to drive the apparel company's next growth stage.

The company will start rolling out a broader assortment of beauty and cosmetics products at certain Old Navy stores starting this fall, the company said Thursday. The Wall Street Journal reported the news earlier in the day.

That includes certain items sold under the Old Navy brand, including hair and body mist and body lotion, as well as skin care, makeup, and hair care products from brands such as E.l.f. Beauty, Mario Badescu, and Korean beauty names. Most products will be priced under $25, according to the Journal.

Gap also plans to expand the accessory assortment offered across its brands, Dickson said Thursday, speaking to a packed room at the Goldman Sachs Global Retailing conference.

The company already has some exposure to both of these categories. For instance, some Old Navy stores have a small selection of cosmetics available at their checkout lanes, and Banana Republic has a fairly expansive line of accessories that include handbags, belts, and jewelry. But both accessories and cosmetics still represent a small portion of the total company's sales, making them "sleeper categories," according to Dickson.

"We believe those are two very big opportunities to go after, attracting new generations, as well as high-margin businesses that will complement our apparel business," Dickson said.

Some of those initiatives are already under way. Just this week, Old Navy dropped a new line of handbags ahead of the fall season, all priced below $50. And the company plans to roll out its expanded beauty assortment in checkout lanes at roughly 150 stores this fall. Some of those will have dedicated beauty shops with their own staff.

"We intend to really start to invest in those categories and start to build them up as true businesses within our brand and within our portfolio," Dickson said.

Gap stock was up 5.1% in Thursday trading to $23.74. Trading in the shares was temporarily halted earlier in the day, citing news pending.

In December 2024, Barron's named Gap a stock pick.

Given Gap's scale -- the company drove a little over $15 billion in revenue in fiscal 2024 -- even a moderate sales lift driven by beauty and accessories could yield "sizable incremental revenue and profit," Corey Tarlowe, an analyst at Jefferies, wrote.

"GAP's expansion into beauty and accessories is more than opportunistic -- it's a strategic extension of its transformation playbook, in our view," Tarlowe said. "With strong consumer validation, financial flexibility ($2.4B cash), and proven execution, we think these categories could become meaningful growth engines in time."

Tarlowe acknowledged adoption will take time, which means the benefits likely won't show up on the bottom line for several months.

The category expansion supports the goals of Dickson's broader turnaround strategy, which seeks to increase Gap's cultural relevance across diverse consumer demographics, Tarlowe wrote. The company is two years into the turnaround. So far, efforts seem to be working. Gap topped second-quarter earnings estimates and has posted six consecutive quarters of positive same-store sales growth.

"We've been working really hard to fix the fundamentals and reach this stage where we feel confident and excited about this next phase," Gap CEO Dickson said.

The better results stem from improved product offerings, enhancements to the customer experience both in stores and online, and innovative marketing campaigns that have helped boost Gap's brand awareness. Its recent "Better in Denim" campaign, starring international girl group KATSEYE, went viral online, racking up 8 billion impressions worldwide.

Earnings from American Eagle Outfitters proved how helpful viral campaigns can be in boosting revenue. The company said its latest partnerships with Sydney Sweeney and Travis Kelce -- which combined generated 40 billion impressions -- are helping increase brand awareness, customer acquisition, and sales. American Eagle stock soared 30% Thursday.

"If only everyone can get Sydney Sweeney to market their products, Travis Kelce too, the U.S. economy would boom," wrote Peter Boockvar, chief investment officer of One Point BFG Wealth Partners, in a newsletter.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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September 04, 2025 12:22 ET (16:22 GMT)

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