Gap Inc (NYSE:GPS) stock fell 2.60% (As on Mar 4, 11:27:18 AM UTC-4, Source: Google Finance) after the company offered an upbeat forecast for its profits in 2022, in spite of rising inflation and logistics challenges. Gap swung to a loss in the three-month period ended Jan. 29 of $16 million compared with net income of $234 million, a year earlier. In the first quarter, though, Gap sees revenue contracting by a mid-to-high single-digit rate compared with the prior year. Analysts had been looking for a smaller 3.8% drop. Same-store sales grew 3% year over year, short of the 3.7% increase that analysts had been looking for. On a two-year basis, same-store sales were also up 3%. Gap said its gross margins contracted to 33.7% in the fourth quarter, falling short of analysts’ estimates for 35.2%, according to StreetAccount. Gap said the metric was pressured by higher air freight costs, which were partially offset thanks to the company selling more hoodies and denim at full price points.

Further, the company expects to deliver an operating margin of 6.3 percent to 6.8 percent. First quarter ending inventory is expected to be up in the mid-20 percent range relative to the first quarter of fiscal year 2021 as a result of earlier booking to offset longer in-transit times. For the full year, Gap expects to earn between $1.85 and $2.05 per share, on an adjusted basis, with sales growing a low single digit percentage from 2021. Analysts were projecting annual adjusted per-share earnings of $1.86, with sales up 1.6% from prior-year levels.

GPS in the fourth quarter of FY 21 has reported the adjusted loss per share of 2 cents, beating the analysts’ estimates for the adjusted loss per share of 14 cents. The company had reported the adjusted revenue of $4.53 billion in the fourth quarter of FY 21, beating the analysts’ estimates for revenue of $4.49 billion.

Moreover, Old Navy was hurt in part due to supply chain complications, with same-store sales flat compared with 2019. At Gap’s namesake banner, same-store sales climbed 3% on a two-year basis, fueled by double-digit growth in North America. The company said the brand is poised to grow in the coming months thanks to a recent tie-up with Walmart for home goods, as well as its collaboration with rapper Kanye West. Banana Republic same-store sales dropped 2% from 2019 levels, in part due to ongoing store closures. Same-store sales at Athleta, Gap’s growing athletic apparel line for women, surged 42% on a two-year basis. The company said Athleta is still on track to hit $2 billion in annual sales by 2023.