By Aditi Sebastian
(Reuters) – Gap Inc’s full-year net sales and profit forecasts fell short of Wall Street expectations on Tuesday, after the company flagged a hit of up to $650 million in lost annual sales due to supply chain disruptions going into the crucial holiday season.
Shares of the San Francisco-based retailer sank about 16% in after-market trade as surging expenses forced the company to significantly lower its full-year net sales and profit forecasts.
Inventory shortages due to port congestion, surging shipping costs and labor crunches have been plaguing retailers, with companies such as Abercrombie & Fitch and Nike having to deal with delayed inventory and empty shelves.
Gap, grappling with factory closures in Vietnam which accounts for 30% of production, said shortages dented third-quarter sales by about $300 million, as brands were unable to meet strong demand stemming from eased restrictions and a return to social gatherings.
However, Chief Executive Officer Sonia Syngal remained optimistic for plans to air-carry products due to continued strong demand for Gap’s Yeezy hoodies and Old Navy clothing.
“The supply chain situation does seem to be improving at this point…the bet we made to air product was to build on the momentum we had in the business,” Syngal told Reuters.
The company, which ended the third quarter with inventory down 1%, is now investing about $450 million in air freight annually and expanding its shipping port network to mitigate product shortages during the busy holiday season.
The Old Navy owner expects annual net sales of about 20%, compared with its prior forecast for growth of 30%. Analysts expect a 28.4% growth, according to IBES data from Refinitiv.
Gap also cut its estimates for annual profit, excluding some charges, to between $1.25 and $1.40 per share from $2.10 to $2.25. Analysts on average expect a profit of $2.20 per share.
(Reporting by Aditi Sebastian in Bengaluru; Editing by Krishna Chandra Eluri)
