Gap, Inc. (NYSE: GPS) Misses Analysts’ Third-Quarter Estimates

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Gap, Inc. (NYSE: GPS) stock fell 3.25% (As on Nov 26, 10:51:06 AM UTC-4, Source: Google Finance) after the company missed the analysts estimates for the third quarter of FY 21 as Covid-related factory closures led to significant product delays in the quarter. The company has slashed its full-year outlook. Gap has swung to a net loss of $152 million in the third quarter of FY 21, from net income of $95 million, a year earlier. Gap’s inventories were down 1% at the end of the third quarter compared with year-ago levels, and they were flat versus 2019. Gap said it expects fourth-quarter inventories to be up high-single digits year over year. Old Navy was disproportionately impacted by supply chain delays, particularly its women’s assortment. As a result, same-stores sales fell 9% year over year, but remained up 6% compared with 2019. At its namesake Gap brand, same-store sales rose 7% from a year earlier and were up 3% versus 2019. The ongoing store closures have helped the brand report healthier growth. Gap is also focused on trimming back merchandise in stores to keep the locations “lighter and brighter”. At Banana Republic, which focuses more on selling work wear for women, same-store sales rose 28% from year-ago levels and fell 10% on a two-year basis. Same-store sales at Athleta, Gap’s rival to Lululemon and Nike for women, increased 2% from a year earlier and rallied 41% versus 2019.

GPS in the third quarter of FY 21 has reported the adjusted earnings per share of 27 cents, missing the analysts’ estimates for the adjusted earnings per share of 51 cents. The company had reported the adjusted revenue of $3.94 billion in the third quarter of FY 21, missing the analysts’ estimates for revenue of $4.47 billion. However, gross margins were 42.1% in the third quarter, Gap’s highest rate for this period in 10 years.

Gap, Inc. expects FY2021 EPS to be in the range of $1.25-$1.40, versus the consensus of $2.20. Gap now expects full-year revenue to be up about 20%, which is less that its prior outlook of about a 30% increase. Analysts polled by Refinitiv had been looking for a 28.4% year-over-year gain. Its revised outlook takes into account roughly $550 million to $650 million of lost sales from supply chain constraints and about $450 million in air freight costs for the year.

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