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Gap Stock Tanks 22% On FY Outlook

Shares of Gap Inc. (GPS) tanked over 22% on Wednesday morning after the apparel retailer lowered its full-year 2021 financial outlook, hurt by supply chain constraints and high air freight costs.

GPS is currently trading at $18.26, down $5.25 or 22.33%, on the Nasdaq, on a volume of 18.2 million shares, above average volume of 8.2 million shares. In the 52-week period, the stock has traded between $18.00 and $37.63.

The company now expects fiscal 2021 adjusted earnings of $1.25 to $1.40 per share and full-year revenue growth of 20%. Analysts polled by Thomson Reuters currently estimate earnings of $2.20 per share on revenue growth of 28.40%.

Previously, the company expected adjusted earnings of $2.10 to $2.25 per share on revenue growth of about 30%.

The guidance now includes an estimated $550 to $650 million of lost sales from supply chain constraints on available inventory, as well as about $450 million in total air freight expense for the year, the company said in a statement.

"While there is still hard work ahead to navigate near-term challenges in the macro environment, the team has made tremendous progress, adapting quickly while never taking their focus off of our long-term objectives," said Katrina O'Connell, Executive Vice President and Chief Financial Officer, Gap Inc. "We have strong demand for our brands and our fleet rationalization and divestitures are progressing well and adding value. Our operating margin remains on track to hit 10% by 2023, in line with our plan, even as we navigate these near-term disruptions. While our mitigation efforts are driving significant transitory costs, we view these as investments in preserving market share and driving overall health and relevance for our brands."

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