Gap stocks plunge after cutting sales guidance

Shares of Gap Inc. slumped on Thursday’s after-hours after the company slashed its forecast for quarterly sales, blaming execution challenges at its Old Navy brand.

The American clothing retailer sank 11.55% or 1.65 points to $12.64 per share. It trailed a drop of 0.56% or 0.08 points to $14.29 per share in the regular trading session.

Accordingly, this downward trend dragged $610.15 million to the company’s market capitalization.

In its latest outlook, Gap expects first-quarter sales to decline in the low to mid-teens percentage range. This forecast came in lower than its prior guidance of mid to high-single-digit year-over-year declines.

The retailer mentioned that it would provide an updated fiscal 2022 outlook when it reports quarterly results on May 26.

Subsequently, the firm said that it had to take an aggressive approach to balance inventory, leading to increased marketing promotions.

Gap also struggled to weather continued logistics disruptions and rising inflation that threatened to curtail consumer spending.

Consequently, the continued snarled supply chain has been tough on its Old Navy division, targeting lower-income consumers.

Moreover, the delayed shipments reflected that the retailer had not had enough merchandise on hand to meet shopper demand.

Correspondingly, its fiscal fourth-quarter posted flat sales at Old Navy compared with 2019. Then, it reported a $16.00 million net quarterly loss in the same period.

Reports also revealed that Gap plans to close its brand sites in Europe in May. This move followed a review of its Banana Republic company-operated e-commerce operations in the region. Meanwhile, the segment will remain open for business in the United States.

Before the extended trading, Gap had traded 22.34% or 4.11 points lower since the start of the year.

Gap’s Old Navy CEO Exits

Furthermore, Gap announced the exit of Old Navy CEO Nancy Green this week. Eventually, the company’s head Sonia Syngal would lead the brand until a successor gets hired.

Syngal explained that it is the right time to have a new leader with operational rigor and a creative vision.

Subsequently, Gap has established a goal of Old Navy reaching $10.00 billion in sales by 2023. The firm exerted efforts to expand the segment’s appeal by offering larger sizes.

In addition, executives have boosted the unit’s e-commerce capabilities and added flexibility to its apparel production.

Last month, the parent firm mentioned that Old Navy’s sales in 2021 surpassed $9.00 billion.

Nevertheless, the business anticipates more markdowns in the industry that would likely weigh on the retailer’s profits.