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What Changed
Risk factors · Mar 18, 2025 → Mar 17, 2026
51 added · 47 removed between the two most recent 10-Ks. The risks a company starts — or stops — disclosing are often the story.
Newly disclosed
For example, during fiscal 2025, the United States enacted significant changes to its trade policy and imposed substantial tariffs on imported goods from most countries, which increased cost of goods sold during fiscal 2025.
For example, in 2025 we were affected by a global outage at Microsoft which impacted various Microsoft services.
If our international expansion plans are unsuccessful or do not deliver the results we anticipate, our business, financial condition, and results of operations could be adversely affected. 13 Our investments in customer, digital, AI, omni-channel, and other strategic initiatives may not deliver the results we anticipate.
We cannot assure you that we will be able to comply with our financial or other covenants under the ABL Facility or that any covenant violations would be waived by our lenders, which could result in an event of default, and, as a result, our lenders under the ABL Facility could declare all outstanding principal and interest to be due and payable, could suspend commitments to make any advances, or could require any outstanding letters of credit to be collateralized by an interest bearing cash account.
If our use of AI technologies produces deficient, inaccurate, controversial, or misleading work product, or has other unintended consequences, we could be subject to legal liability, regulatory action, and competitive or reputational harm.
There is currently significant uncertainty about the future relationship between the United States and many other countries with respect to tariffs and trade policies, as well as the ability to recover any tariff refunds that may be owed.
Separately, there is increased scrutiny of companies’ diversity initiatives, which could result in criticism, whether due to perceived over or under pursuit of such initiatives, as well as potential litigation or other 18 adverse impacts.
Further, we may be unable to quickly and successfully adapt to rapid change resulting from advancements in AI and similar technologies, or our competitors may have more success implementing and utilizing these technologies than we do.
Our indebtedness could impact our business in the following ways: • limit our flexibility in planning for or reacting to general adverse economic conditions or changes in our business or industry; • impair our ability to restructure our debt or obtain additional debt or equity financing in the future for working capital, capital expenditures, acquisitions, or general corporate or other purposes; • require us to dedicate a substantial portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, acquisitions, and other general corporate purposes; and • place us at a disadvantage compared to our competitors that have less indebtedness. 17 We generated net cash from operating activities of $1.3 billion in fiscal 2025 and ended fiscal 2025 with $3.0 billion of cash, cash equivalents, and short-term investments on our balance sheet.
We continue to integrate AI and similar technologies across our business, which presents risks, challenges, and ethical issues that could impact our operations and result in liability.
In the past, we have taken significant impairment charges on delayed or unproductive inventory, and we may be required to take similar impairment charges in the future.
Data sets used by AI may be overbroad, insufficient, or contain biased information, and AI may generate offensive, illegal, inaccurate, or otherwise harmful content.
No longer disclosed
For example, the United States has imposed substantial tariffs and bans on goods imported from China (including the Uyghur Forced Labor Prevention Act) and has imposed or proposed imposing substantial tariffs on goods 10 imported from Mexico, Canada, the European Union, and from other countries that impose tariffs on U.S. products.
We could also be required to take significant impairment charges on delayed or unproductive inventory, which we experienced in 2022.
Any violation that is not waived could result in an event of default and, as a result, our lenders under the ABL Facility could declare all outstanding principal and interest to be due and payable, could suspend commitments to make any advances, or could require any outstanding letters of credit to be collateralized by an interest bearing cash account, any or all of which could adversely affect our business, financial condition, and results of operations.
Negative perception of our diversity, equity, and inclusion initiatives, whether due to perceived over or under pursuit of such initiatives, may likewise result in criticism as well as potential litigation or other adverse impacts.
For 12 example, we recently completed our initiative to rationalize the Gap and Banana Republic store fleet by closing, net of openings, 344 Gap and Banana Republic stores in North America from the beginning of fiscal 2020 to the end of fiscal 2023.
In fiscal 2024, less than 10 percent of our merchandise, by dollar value, was purchased from factories in China, and less than 1 percent of our merchandise, by dollar value, was purchased from factories in Mexico and Canada combined.
For example, global trade flows were recently impacted by attacks on cargo ships in the Red Sea, and port strikes in the United States.
We generated net cash from operating activities of $1.5 billion in fiscal 2024 and ended fiscal 2024 with $2.6 billion of cash, cash equivalents, and short-term investments on our balance sheet.
Changes in tax and trade policy, such as the imposition of new duties or tariffs on imported products, or disruptions to our sourcing operations in our sourcing countries, could increase the cost or reduce the supply of apparel available to us and adversely affect our business and results of operations.
In addition, the cost of fuel is a significant component of transportation costs, so increases in the price of petroleum products (including due to inflationary pressures, geopolitical instability, or regulation of energy inputs and greenhouse gas emissions) could adversely affect our gross margins.
If our vendors, or any raw material suppliers on which our vendors rely, suffer prolonged manufacturing or transportation disruptions due to pandemics and public health crises, extreme weather conditions and natural disasters, geopolitical instability, or other unforeseen events, our ability to source product could be adversely impacted which would adversely affect our sales and results of operations. 11 Risks associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct, could harm our business.
If our employment proposition is not perceived as favorable compared to other companies, including due to our requirements or expectations about when or how often certain employees work on-site or remotely, it could negatively impact our ability to attract and retain talent.