Gap cuts outlook for 2021 as sales suffer amid supply chain disruptions

Gap has lowered its projection for 2021 sales and profit as supply-chain issues led to lost sales and higher expenses. 
In response to the supply-chain issues, Gap said it has added longer timelines into its business plan for the coming year.
// Gap swings to loss as its sales suffer from ongoing supply chain disruptions
// The retailer now sees revenue growing about 20% for the full year, down from its previous projection of 30%

Gap has lowered its projection for 2021 sales and profit as supply-chain issues led to lost sales and higher expenses.

The fashion retailer reported a third quarter fiscal year 2021 diluted loss per share of 40 cents.

The company noted that while supply chain constraints continue, it is leveraging increased air freight and port diversification to navigate ongoing delivery challenges for holiday.

READ MORE: Supply chain disruption could last until 2023

“While we entered the third quarter with growing momentum, acute supply chain headwinds affected our ability to fully meet strong customer demand,” said Gap chief executive Sonia Syngal in a press release.

“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 brand net sales declined 10 per cent versus 2019, with permanent store closures resulting in an estimated 18 per cent net sales decline.

However, the retailer’s online sales grew 48 per cent compared to the third quarter of 2019 and represented 38 per cent of the total business.

Third quarter comparable sales were up 5 per cent versus 2019.

Looking forward, Gap has trimmed its full-year financial outlook in line with the supply chain difficulties it continues to face.

The retailer now expects annual diluted earnings per share to be in the range of $0.45 to $0.60 in 2021, a figure which includes an estimated $550 million to $650 million in lost sales as a result of the disruptions, as well as around $450 million in air freight expenses incurred as the group attempts to navigate these issues.

Full-year net sales are now predicted to be up approximately 20 per cent compared to 2020, as previously Gap had said that it expected an increase closer to 30p per cent.

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