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  /  News   /  Earnings Results: Gap stock tanks as results miss, guidance lowered due to ‘significant’ supply-chain issues

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

Gap Inc. on Tuesday blamed “significant” supply-chain constraints as it cut its full-year earnings guidance and reported third-quarter results that fell short of expectations.

Supply constraints in the third quarter included COVID-related factory closures and continued port congestion, according to the retail chain.

“Acute supply chain headwinds affected our ability to fully meet strong customer demand,” said Chief Executive Sonya Sengal in a statement. She said the company chose “accelerated use of air freight” to serve customers this holiday season, calling it “an intentional investment in building enduring customer loyalty.”

Gap
GPS,
-1.80%

shares sank after hours. They were down almost 15% as of 5 p.m. EST after falling almost 2% in the regular session to close at $23.47. 

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

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

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

The company now expects its reported full-year diluted earnings per share to be 45 cents to 60 cents, which it said includes an estimated $550 million to $600 million in lost sales because of supply constraints, and about $450 million in air freight expenses for the year. Gap expects adjusted full-year diluted earnings per share in the range of $1.25 to $1.40, falling short of analysts’ expectation of $2.15 a share.

Gap stock has gained about 15.5% so far this year, while the S&P 500 Index
SPX,
+0.17%

has seen a 24% increase year to date.

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