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Supply Chain Cost Gap Paradox Inc $152 million – WWD

Gap Inc. to be feel the effects of COVID-19 regarding supply chain problems.

Retailer – Gap’s parent company, Athleta, Banana Republic, Intermix and Old Navy brand – disclosed quarterly income Tuesday after the market close, a drop in both top and bottom profits, from both last year and pre-pandemic levels, cost the company $152 million for the quarter. As a result, the company’s stock fell more than 16% in after-hours trading.

Sonia Syngal, chief executive officer of parent company Gap Inc., said in a statement: “While we entered the third quarter with growth momentum, severe supply chain difficulties took a toll on us. Our ability to fully meet customer needs is strong. “However, we have purposefully invested in building long-term customer loyalty by accelerating the use of air freight to serve them. holiday, choosing a long-term growth opportunity versus a short-term impact on profitability. Current pressures haven’t distracted us from what matters: growing billion-dollar brands, delighting more than 64 million customers with products and experiences that drive lasting value, restructuring and digitize our business with the goal of creating a better future, faster. ”

Distance

Store distance prepared for holiday peak shopping season.
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In the three-month period ended October 30, the company’s total revenue fell 1% to $3.94 billion, down from $3.99 billion a year earlier.

By brand, revenue at Gap is down 10% from 2019 levels. The company attributes permanent store closures to about a fifth of those losses, while sales. North American sales remained positive for two years. Additional growth drivers include Launched Yeezy Gap Hoodie in the quarter.

Syngal told analysts on a conference call Tuesday night that more Yeezy jackets are sold online in a single day than any other item in Gap’s history.

“We are unlocking a new audience for Gap,” she said.

Banana RepublicThe brand’s net sales decreased by 18% compared to 2019. The brand’s comparative sales also decreased by about 10% compared to 2019.

Athleta's Store

Athleta continues to be Gap Inc’s biggest growth driver.
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Meanwhile, Athleta continues to shine thanks to her strength in activewear and the launch of AthletaWell, an online wellness and fitness platform, in July. The brand’s net sales were up 48 percent in the quarter, compared with 2019. Comparative sales were up 2 percent year-over-year or 41 percent year-over-year in 2019. Athleta also opened doors. first row in Canada in the quarter. The brand previously set a target of $2 billion in sales by 2023.

Old Navy Store

Old Navy expanded its reach in all stores and online throughout the summer with the launch of its “Bodequality” campaign.
Courteous photo

Net sales at Old Navy grew 8%, compared with 2019 levels, while comparable sales were down 9% from 2020. In August, Old Navy has expanded its scale services, both online and in-store, up to size 30 with the launch of the “Bodequality” campaign.

Other trends include comparative sales in the third quarter, up 5% from 2019. Online sales also increased 48% this quarter, compared with the third quarter before the pandemic 2019.

Still, the company lost $152 million in the past three months, compared with a profit of $95 million a year earlier, or $140 million in the third quarter before the 2019 pandemic.

As a result, the company has adjusted its guidance for the full year of 2021. The company now expects the full year income-year share ranges from $0.45 to $0.60 per person. Gap is also expected to add $550 million to $650 million in lost revenue for the year due to ongoing supply chain constraints on inventory and about $450 million higher in air freight charges for the year.

“Supply chain conditions continue to be volatile,” said Katrina O’Connell, executive vice president and chief financial officer, Gap Inc., in a statement.

“While there is still a lot of hard work ahead to overcome short-term challenges in the macro environment, the team has made tremendous progress, adapting quickly while never focusing on goals. our long-term,” O’Connell added in a statement. “We have strong demand for our brands and our fleet streamlining and divestment is progressing well and adding value. Our operating margin remains on track to reach 10% in 2023, in line with our plans, even as we adjust for these short-term disruptions. While our mitigation efforts are leading to significant temporary costs, we see these as investments in maintaining market share and promoting the overall health and fitness of our brands. our brand.

Gap Inc. ended the quarter with $1.4 billion in long-term debt, $801 million in cash and cash equivalents, and 3,459 stores in more than 40 countries, including 2,873 company-operated stores.

In August, Gap acquired Drapr, one ecommerce The startup lets shoppers try on virtual clothes using a 3D avatar. Then in October, the company acquired another company, this time NS New York– and based in Tel Aviv Context-based startup 4 Cast. The company uses AI and machine learning to increase sales and improve customer experience with demand sensing and predictive analytics.

Shares of Gap Inc., closed down 1.96% at $23.47 a day on Tuesday, down 12.6% year-over-year.



https://wwd.com/business-news/financial/gap-loses-152-million-supply-chain-headwinds-1235002700/ Supply Chain Cost Gap Paradox Inc $152 million – WWD

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