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Gap Inc fell below Wall Street estimates for quarterly profit on Tuesday, as a pivot in online sales fueled a surge in marketing and shipping costs, causing the clothing retailer’s shares to fall by about 11% in the context of extended exchanges.
The company also forecasted fourth-quarter sales to be flat or slightly higher than last year, and warned of pressure on margins due to high shipping costs, including air freight, so as retailers are rushing to move merchandise before the holiday season.
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Online sales jumped 61% in the third quarter as customers stuck at home purchased comfortable joggers, yoga pants and tops from its Old Navy and Athleta brands, helping Gap report a surprise increase in sales comparable.
But it came at a cost, with operating expenses rising about 8% in the quarter.
| Teleprinter | security | Latest | Change | Change% |
|---|---|---|---|---|
| GPS | DIFFERENCE | 26.87 | +0.81 | + 3.11% |
Gap, which has launched digital campaigns such as “Stand United” and “Be the Future”, will continue to make marketing investments, CEO Sonia Syngal said.
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“With this COVID environment and really a lot of weaker players seeing a significant amount of disruption, we see this as an important time to invest in our brands for demand generation,” Syngal told analysts.
Comparable sales rose 5%, beating the average estimate of a 0.62% decline, according to IBES data from Refinitiv.
Store sales fell 20% in the third quarter, and Gap reiterated plans to close several hundred Gap and Banana Republic stores around the world, while opening profitable Old Navy and Athleta stores.
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The San Francisco-based retailer reported net income of $ 95 million, or 25 cents per share, for the three months ended Oct. 31, compared with earnings of $ 140 million, or 37 cents per share, a year over early.
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Analysts expected the company to earn 32 cents per share.
(Reporting by Nivedita Balu in Bengaluru; Editing by Sriraj Kalluvila)
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