Omnichannel apparel retailer Gap (GPS) reported a substantial decline in its revenues and profit margins in the last quarter due to inventory shortfalls because of the global supply chain disruptions. As the travel restrictions are reimposed amid concerns surrounding the omicron coronavirus variant, will GPS be able to overcome its production and delivery-related challenges soon? Read more to find out.Renowned specialty retail apparel company The Gap, Inc. (GPS) announced its fiscal third-quarter earnings (ended October 30, 2021) on November 23, 2021. GPS’ net sales fell 1.3% year-over-year to $3.94 billion, despite a 48% increase in online sales from the 2019 levels. Operating income fell 12.6% from the same period last year to $153 million. The company’s net loss came in at $152 million, reflecting a substantial decline from the year-ago net profit of $95 million. Loss per share came in at $0.40, missing the analyst estimates by 46%. Following the third-quarter earnings release, the stock declined 26.3% to close Friday’s trading session at $17.33.
GPS has cited supply chain constraints due to factory closures and port congestions as the main reason behind its poor performance in the last quarter. The significant delays in deliveries affected the company’s inventory margins as well as sales, as it was not able to meet the strong market demand.
GPS’ management stated that it has been working to increase air freight and port diversification to meet the demand this holiday season. However, with the rising concerns surrounding the omicron coronavirus variant leading to the reimposition of travel restrictions worldwide, GPS’ inventory shortfall will likely continue throughout the fiscal fourth quarter (ending January 2022).