Gap Inc Cut Full Year Guidance After Reporting First Quarter Sales

May 27, 2022 By MarketDepth

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Gap Inc (NYSE: GPS) cut its profit guidance for the full year on Tuesday after reporting a fall in first-quarter sales. The sales results were primarily determined by its Old Navy business. Gap shares tumbled almost 20% during after hours trading amid the news.

Multiple Issues Contributed to Poor Performance

Following the ongoing supply chain delays and a rise in promotions, Old Navy’s performance faltered throughout the quarter. Consumers are starting to feel the pressure as inflation continues to rise, according to Chief Executive Officer Sonia Syngal. Furthermore, Syngal revealed that shoppers are moving away from active wear, the company’s strong suit, to more office clothes and going out pieces such as party dresses.

“We’re dealing with really volatile consumer signals — whether it was last year in Covid, or this year’s post-Covid behaviors. Over time, we’ll see customer preference for product types balanced out.”

Chief Executive Officer, Sonia Syngal

Gap now foresees fiscal 2022 per-share profit to be between USD0.30 and USD0.60 on an adjusted basis, in comparison to the previous estimate of USD1.85 to USD2.05.

“At the end of the day, the company needs to re-elevate its brand perception, willing to sell less and charge more, which is much easier said than done,”

BMO Capital markets Analyst Simeon Siegel