Gap Margins Slashed by Tariffs, Sales Dragged by Athleta (2)

Gap Inc. expects its margins will shrink this year, a sign tariffs are slowing recent turnaround momentum.

Comparable sales rose 1% in the quarter ended August 2, missing analysts’ expectations of almost 2% growth. The miss was driven by a 9% comparable sales decline at Athleta, which lagged behind estimates of a 4% drop.

The San Francisco-based company has been trying to revive its business under Chief Executive Officer Richard Dickson, but some of its brands are further along than others. Changes at its namesake brand and Old Navy seem to be working, but Banana Republic and Athleta haven’t ...