The news: Gap Inc. and American Eagle blamed lackluster styles for their underperformance in fiscal Q1 2026.

• Gap CEO Richard Dickson said that Old Navy’s failure to offer “the right fashion and value equation” in women’s dresses hurt sales, although traffic remains healthy.
• American Eagle CEO Jay Schottenstein pointed to “softer trends in women’s bottoms, including denim, along with pressure on seasonal categories during a colder spring” as reasons for the brand’s 2% comparable sales decline in the quarter ended May 2.

The big picture: Both companies were quick to emphasize that any weakness in the quarter was due to execution missteps rather than softening demand.

• Gap executives repeatedly stressed that consumers largely remain resilient, and there has been no meaningful shift in behavior thus far—nor do they expect any changes for the remainder of the year, despite macroeconomic pressures.
• American Eagle believes the US economy is strong and will “only get better as time goes on,” Schottenstein said on the company’s earnings call.

Implications for retailers: As Dickson pointed out, fashion is a dynamic business—and brands that are popular with consumers one day can quickly fall out of favor if they fail to provide the right balance of style and value. With growing budget constraints pushing shoppers to be pickier about when and where they buy, retailers need to ensure they have the design talent and infrastructure required to shape trends rather than respond to them.

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