Gap revises full year outlook after supply chain disruption
Gap has revised its full year outlook after suffering supply chain issues in its third quarter.
The owner of the Gap, Old Navy and Banana Republic brands posted a diluted loss per share of $0.40 in the period.
Third quarter comparable sales were up 5% on 2019 while online sales grew by 48%. However, net sales of $3.9 billion were down 1% compared to two years ago due to supply chain disruption.
Inventory was down 1% year-over-year in the quarter and flat compared to 2019. The company expects fourth quarter ending inventory to be up high single digits versus last year, although it warned this might change due to continued volatility in its supply chain.
Sonia Syngal, chief executive of Gap Inc., said: “While we entered the third quarter with growing momentum, acute supply chain headwinds affected our ability to fully meet strong customer demand. Still, we made an intentional investment in building enduring customer loyalty with accelerated use of air freight to serve them this holiday, choosing long-term growth opportunity over near-term impact to profitability.”
Gap Inc. is now forecasting that its reported full-year diluted earnings per share will be in the range of $0.45 to $0.60, which includes a $325 million loss on extinguishment of debt and approximately $120 million in net charges primarily related to divestitures and changes to its European operating model.
Excluding these charges, adjusted full-year diluted earnings per share are expected to come in between $1.25 and $1.40. This guidance includes an estimated $550 to $650 million of lost sales from supply chain constraints on available inventory, as well as approximately $450 million in total air freight expense for the year.
Looking ahead, Syngal said: “Current pressures have not distracted us from what matters: growing our billion-dollar brands, delighting our over 64 million customers with product and experiences that drive lifetime value and restructuring and digitizing our business with an eye on creating a better future, faster.”
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