Data
What clearing the 2022 glut cost Gap
The inventory series shows how much merchandise moved. The income statement shows what moving it cost. In the fiscal year ended January 28, 2023, Gap’s gross margin fell to 34.3 percent from 39.8 percent and operating margin turned negative. Applied to that year’s revenue, the 5.5 point gap is worth about $857 million of gross profit.
By The Retail Ledger · September 27, 2026
The figures
| Fiscal year | Ended | Revenue ($M) | Gross profit ($M) | Gross margin | Operating margin |
|---|---|---|---|---|---|
| FY2021 | Jan 29, 2022 | 16,670 | 6,637 | 39.81% | 5.27% |
| FY2022 | Jan 28, 2023 | 15,616 | 5,359 | 34.32% | -0.41% |
| FY2023 | Feb 3, 2024 | 14,889 | 5,775 | 38.79% | 3.75% |
| FY2024 | Feb 1, 2025 | 15,086 | 6,227 | 41.28% | 7.38% |
| FY2025 | Jan 31, 2026 | 15,366 | 6,268 | 40.79% | 7.18% |
Reading it carefully
The $857 million figure is an arithmetic comparison, not an accounting measure of the cost of the glut. It answers one question: what would the same revenue have produced at the prior year’s margin. Freight, foreign exchange, mix and impairment all moved in that year as well, and Gap attributes the margin decline to several causes in its filings.
What the company said in its own annual report for that year: “certain product did not meet consumer preferences resulting in higher levels of promotional activity and lower-than-planned gross margins and, in some cases, we were required to take significant impairment charges on unproductive inventory.” The full language is in the risk factor comparison.
The recovery is as notable as the fall. Margins came back above the pre-glut level by fiscal 2024 and have held there, which is what makes fiscal 2022 a discrete event in the series rather than a trend.
Source: Gap Inc. annual reports on Form 10-K. Free to reuse with attribution to The Retail Ledger.