Shares of the company surged 21% after the bell as the Banana Republic owner saw strong spring shopping, similar to mall-based retailers like Abercrombie & Fitch (ANF.N), which had also hiked its annual sales goal.
Gap's quarterly store sales jumped 3% from a year ago as it has been expanding its store presence, while online sales rose 5% to account for 38% of the total sales.
The company's turnaround strategy to lower promotions and focus on right product assortment is yielding results after weak growth last year due to lackluster demand and supply chain issues.
"Shoppers are willing and able to spend if they see value in an on-trend, well-made dress from Gap or a burrito bowl from Chipotle," Zak Stambor, a senior analyst at Emarketer said.
Gap also lifted its fiscal 2024 margin forecast to at least 150 basis points growth compared with a prior target of as much as 50 bps expansion.
It now sees annual sales to be up slightly from last year and compared with prior expectations of roughly flat sales.
First-quarter gross margin jumped 410 basis points to 41.2%. Analysts had expected margin of 38.54%.
At Old Navy, comparable sales grew 3% compared with 1% decline a year ago, while Gap logged 3% growth.
Its net sales for the quarter ended May 4 rose 3% to $3.39 billion, edging past analysts' average estimate of a 0.3% rise to $3.29 billion. Comparable sales rose 3% from a year ago and compared with expectations of 0.9%, according to LSEG data.
It earned 41 cents per share.
Peer American Eagle Outfitters (AEO.N) had on Wednesday missed quarterly revenue estimates as sticky inflation hurt demand for its clothing and accessories.
