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Supply Chain Pressure, Covid-related Factory Closures Dampen The Gap (GPS) Third Quarter Earnings Report

Wednesday, November 24, 2021 08:24 AM | Kyle Depontes
Supply Chain Pressure, Covid-related Factory Closures Dampen The Gap (GPS) Third Quarter Earnings Report

Gap Inc. (GPS), a clothing and apparel retailer that includes brands such as Old Navy, Banana Republic, and Athleta, today reported earnings for the third quarter of 2021.

The company posted a diluted loss per share of 0.40, and quarterly net sales of $3.9 billion, down 1% compared to 2019.

Supply Chain Constraints

Gap faced significant supply chain challenges in the quarter, with the company estimating an 8 percentage point negative impact due to constrained inventory.

“While we entered the third quarter with growing momentum, acute supply chain headwinds affected our ability to fully meet strong customer demand," said Sonia Syngal, Gap CEO.

The company also noted that global supply chain disruption wasn't limited to COVID-related factory closures, but also caused significant port congestion, which led to product delays.

As a result, the reduced inventory meant that Gap was "unable to fully meet strong consumer demand."

Going forward, Gap intends to leverage air freight and port diversification to navigate the ongoing restraints.

E-commerce Growth

Gap's supply chain struggles have led the company to increasingly rely on its e-commerce platform.

The company stated that it "remains focused on digital dominance through investing in its e-commerce platform, strategically closing unprofitable stores and partnering to amplify in international markets."

Online sales grew a whopping 48% compared to the third quarter of 2019 and represented 38% of the total business.

Gap has also upped investments in technology as it accelerates its digital strategy.

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