Gap Beat Earnings. The Stock Is Dropping.

Gap’s same-store sales increased 1% from last year. (Scott Olson/Getty Images)

Gap topped second-quarter earnings expectations, but the stock fell Thursday after the retailer warned that tariffs would affect profit margins.

Shares of Gap, which owns Old Navy, Gap, Banana Republic, and Athleta, were down 6% in after-hours trading Thursday.

The company’s adjusted earnings per share for the quarter ended Aug. 2 were 57 cents, ahead of expectations for 55 cents a share.

Yet new tariffs on imports could pressure earnings growth in the coming quarters.

Gap is expecting its full-year operating margin to range from 6.7% to 7%, down from 7.4% the prior fiscal year. The range includes an impact of roughly one percentage point tied to tariff costs, Gap said.

Third-quarter gross margins will also be affected by the new levies. While the company didn’t provide a precise estimate, it expects tariffs to pose a drag of about two percentage points on gross margin.

Barring the margin update, Gap kept the rest of its full-year guidance largely unchanged. It continues to see net sales increasing between 1% and 2% from the prior year. And for the third quarter, Gap expects sales to increase between 1.5% and 2.5% from last year. The Street was projecting a 2% rise, according to FactSet.

Gap’s steady revenue performance has been a bright spot for the apparel retailer in recent quarters. The company has beat analysts’ sales expectations seven of the past eight quarters.

Indeed, revenue for the second quarter was $3.72 billion, largely unchanged from last year and a hair lower than the $3.73 billion Wall Street was projecting.

The slight miss stems from weaker sales at Athleta, Gap’s activewear brand. Athleta’s same-store sales fell 9% this quarter compared with last year, compared with a 4% decline in the year-ago quarter. The sales drop dragged Gap’s total company same-store sales to a 1% increase, lower than the 2% rise analysts were looking for.

Athleta CEO Chris Blakeslee stepped down from the role in July. His replacement, Maggie Gauger, is a 20-year Nike veteran who, until recently, oversaw the company’s North America Women’s business.

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