Gap expects strong earnings as clothing demand rebounds and stocks jump
Gap Inc. forecast full-year earnings above estimates on Thursday, betting on strong demand for jeans and shirts from its Old Navy and Athleta brands as a drop in Omicron cases encourages Americans to venture out more.
Shares of the company rose 15% to $16.37 in extended trading.
However, many U.S. clothing chains are struggling to keep up with growing demand as shipments are delayed due to port congestion and limited capacity.
Gap also said it was addressing short-term supply issues that were hurting holiday quarter results, while its first-quarter sales guidance came in lower than expected.
It expects net sales to decline in the mid-to-high single-digit percentage range, while analysts forecast a 3.8% decline, according to Refinitiv IBES.
Gap has even had to use more expensive air freight to move goods, but the company is optimistic about its performance at the start of the year, as factories reopen in Vietnam’s main manufacturing hub and the problems of supply are gradually dwindling.
The company expects inventory at the end of the first quarter to rise in the mid-20s percent range from a year earlier as the apparel chain builds up to counter longer transit times. long.
San Francisco-based Gap expects adjusted earnings per share for fiscal 2022 to be between $1.85 and $2.05, compared to $1.44 in 2021. Analysts expect $1.86.
Gap’s strong forecast contrasts with rivals Abercrombie & Fitch Co and American Eagle Outfitters Inc., which have warned of heavy freight spending weighing on earnings this year.
By Praveen Paramasivam and Uday Sampath; Editing by Devika Syamnath
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