Gap Stocks Tumble as it Cuts Full-Year Outlook

Shares of Gap Inc. sharply plunged in the post-trading market after the firm slashed its full-year outlook amid the supply chain bottlenecks. 

Accordingly, the clothing retailer company slumped 16.21% or 3.81 points to $19.70 per share. It trailed its Tuesday low of 1.80% or 0.43 points to $23.51 per share.

Correspondingly, its revenue growth guidance declined to 20.00% from its prior projection of 30.00%. Meanwhile, analysts estimated the revenue to be 28.00% higher year-over-year.

In addition, Gap lowered its expected earnings to a range of $1.25 to $1.40 per share. This estimated data significantly weakened from its previous range of $2.10 to $2.25 a share. 

Meanwhile, market participants anticipated that the company would earn $2.20. 

In line with this, Gap explained that the revised outlook considers $550.00 to $650.00 million of lost sales from the supply crunch. 

It also cited that it posted an expense of $450.00 million in total air freight.

Subsequently, it forecasted its full-year diluted earnings per share to be between $0.45 to $0.60. 

Moreover, Gap also posted a lackluster third-quarter report along with its adjusted guidance. 

Its revenue in the three months edged down 1.00% to $3.94 billion from $3.99 billion a year earlier. It also missed the expected $4.44 billion. 

Excluding items, Gap earned $0.27 per share missing the anticipated number of $0.50. 

Moreover, it wavered with a net loss of $152.00 million, or $0.40 per share. This figure is higher than the $95.00 million, or $0.25 a share a year earlier.

Furthermore, experts noted that the challenges in the supply are likely to persist into early next year. 

Nevertheless, Gap still expects its fourth-quarter inventories to gain single digits year-over-year.

Lost Sales Hit Gap’s Old Navy

Subsequently, the reported lost sales greatly impacted Old Navy, particularly its women’s assortment.

As a result, its stores’ sales curtailed 9.00% year-over-year, but it is still 6.00% stronger from 2019.

Nevertheless, this is a sizable drag on the entire business of Gap, whereas Old Navy was its major growth engine. 

On the other hand, Banana Republic’s same-store sales elevated 28.00% from year-ago levels, but it shed 10.00% on a two-year basis.

Furthermore, Gap is hopeful that a tie-up with Kanye West’s Yeezy line would boost its sales and lure in new customers.

Then, other retailers Victoria’s Secret and Abercrombie & Fitch, also announced that the factory closures in Vietnam and clogged ports affected their sales. 

Meanwhile, Gap’s rival Lululemon and Nike increased 2.00% from a year earlier and rallied 41.00% versus 2019.