Investors are falling into the Gap again.

The San Francisco-based retailer and parent company of Old Navy, Banana Republic, Athleta — and its namesake Gap brand — got a boost after reporting strong fourth quarter earnings on Thursday. 

Gap has been selling clothes for more than half a century but had fallen into decline for the better part of the last two decades. In 2023, it brought on a new CEO, Richard Dickson, who oversaw the revitalization of Barbie at Mattel. Sales at Gap’s brands began to turn around last year despite a not-so-friendly environment for discretionary spending. 

Gap might not have its own blockbuster movie like Barbie, but according to Richard Dickson, “Gap is back in the cultural conversation.”

From collaborations with up and coming designers to a new ad campaign featuring emerging young musicians, “There’s some really great momentum around the brand which seemed to be catching the attention of the consumer,” said retail consultant Sonia Lapinsky at AlixPartners. 

Lapinsky said Gap has also leaned into its heritage with callbacks to its iconic dancing commercials, the latest featuring film and TV star Parker Posey.

“They’re really kind of riding this trend that hasn’t quite gone away yet, but this whole ’90s trends and ’90s nostalgia,” said Lapinsky. 

It helps that wide-leg jeans from the retailer’s heyday have been back in style.

But Gap brands like Old Navy also have a durable advantage, said analyst David Swartz at Morningstar.

“People are concerned about inflation and high prices and everything, and Old Navy is known for having relatively low price stuff that’s generally good quality,” said Swartz. 

And those prices aren’t likely to be impacted much by tariffs. Gap imports less than 1% of its components from Canada and Mexico, and less than 10% from China.

“They’ve been preparing for this for some time because this has been discussed now for quite a long time,” said Swartz. 

Mark Cohen, the former director of retail studies at Columbia Business School, worked for Gap in the ’70s, “back in its go, go, days when it really was skyrocketing,” he said. 

Cohen said if it wants to maintain this momentum after decades of struggle, the company will have to do more than splashy marketing. 

“It has to have an extraordinarily powerful five-pocket proposition,” said Cohen. 

Whether those five pockets are in denim or khaki pants, he said Gap needs to deliver on the affordable everyday basics consumers are looking for.