(New York) The clothing group Gap collapsed Wednesday on Wall Street, sanctioned after the drastic lowering of its sales forecasts caused by insufficient supplies to meet demand.
Around noon, the action lost 23.20%, to 18.06 dollars, its lowest level for more than a year (early October 2020).
Gap, which also controls the Banana Republic, Old Navy and Athleta brands, now forecasts a 20% increase in turnover in its 2021 financial year (ended at the end of January 2022), whereas it had so far forecasted an increase of 30 %.
The company was hit hard by the closure, for more than two and a half months, of its main production site (30% of the total), located in Vietnam, due to the pandemic.
Despite strong demand, “we lost sales due to our limited inventory,” CFO Katrina O’Connell said on the earnings conference call.
Added to this was the congestion of ports and container ships, which further delayed deliveries.
The company sees these difficulties as “transitory”, “but they will continue in the fourth quarter and potentially early next year,” admitted the leader.
To deal with this soft spot, the group has taken exceptional measures, in particular with an increased use of air freight, which is much more expensive than its maritime equivalent.
For the fourth quarter alone, an envelope of 350 million dollars has been committed for air transport in order to cope, as much as possible, with the heat of the end of the year holidays.
The effect was marked on margins, and Gap now announces an operating margin of 4.5% for the 2021 fiscal year, against 7% forecast so far.
These difficulties linked to the pandemic and its consequences come at a time when the group is in the process of restructuring, after a year 2020 already marked by sales down 15% and a loss of $ 665 million.
Gap has closed dozens of stores, including all of its stores in the UK, and is attempting a more upscale repositioning of its Banana Republic brand, which began in September.
The group also secured the services of rapper, producer and designer Kanye West, whose first hoodie for the brand, launched at the end of September, was a success.