Gap stock tanks as results miss, guidance lowered due to ‘significant’ supply-chain issues

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Gap Inc. blamed “significant” supply-chain disruptions on Tuesday as it cut its full-year earnings guidance and reported third-quarter results that fell short of expectations, sending its shares sharply lower after hours. sent.

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Supply constraints in the third quarter included extended COVID-related factory closures, such as those in Vietnam – where about 30% of the company’s offerings are produced and closed for two and a half months – and continued port congestion, retail according to the series.

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“Acute supply-chain headwinds impacted our ability to fully meet strong customer demand,” Chief Executive Sonia Singhal said in a statement. She said the company chose “accelerated access to air freight” to serve customers this holiday season, calling it “a deliberate investment in building lasting customer loyalty.”

In addition, Chief Financial Officer Katrina O’Connell said on the earnings call that the company has rerouted some of its shipments to the East Coast to avoid port congestion in Southern California.

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“We are confident that our underlying business is ahead of plan, while adjusting for these substantial disruptive impacts by 2021,” O’Connell said. Both he and Singhal said the demand and the company’s brand are strong.

gap gps,
-1.80%
Shares sank after hours, falling nearly 16% after closing down nearly 2% in the regular session at $23.47.

Third-quarter net sales increased in the company’s Old Navy and Athleta brands compared to the same period in 2019, while its Gap and Banana Republic brands decreased. The company said its online sales grew 48% compared to the third quarter of 2019, comprising 38% of its total business as store traffic continues to improve.

The retailer reported a net loss of $152 million, or 40 cents per share, for the quarter. This compares to net income of $95 million, or 25 cents per share, in the year-ago period. Adjusted for debt-restructuring costs and fees related to the company’s European operating model, earnings were 27 cents per share. Revenue fell to $3.94 billion from $3.99 billion in the year-ago quarter.

Analysts polled by FactSet had forecast earnings of $191 million, or 50 cents per share, on revenue of $4.43 billion.

The company now expects its reported full-year earnings per share to be in the range of 45 cents to 60 cents, with an estimated $550 million to $600 million in lost sales due to supply constraints and air freight. The expenses include approximately $450 million. Year. Gap expects adjusted full-year earnings per share to be in the range of $1.25 to $1.40, lower than analysts’ expectations of $2.15 per share.

Gap stock has gained about 15.5% so far this year, while the S&P 500 index SPX,
+0.17%
A growth of 24% has been observed till date.

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