Gap (GPS) shares closed down 24% on Wednesday, its biggest one day drop on record after the clothing retailer missed on revenue and earnings for its latest quarter. The company also lowered its guidance amid supply chain problems.
Gap management highlighted a two-and-a-half-month production disruption in Vietnam, its top manufacturing country.
"While we had planned into the known supply chain constraints as we entered the quarter, including COVID-related closures in Vietnam, the shock to our business persisted longer than anticipated as weeks turned into months," Sonia Syngal, CEO of Gap, said during an earnings call with analysts following the quarterly results.
The company is expected to incur higher costs as it tries to improve supply for the holidays.
"In the near term, we've secured incremental air capacity to support holiday inventory," CFO Katrina O'Connell said during the earnings call.
"In addition to an estimated $100 million of air costs incurred in Q3, we've also invested approximately $350 million in Q4 airfreight to further expedite holiday deliveries," she added.
Gap posted earnings per share of 27 cents alongside net sales of $3.94 billion for the third quarter. Both those metrics missed analyst expectations.
The company also lowered its 2022 net sales, earnings per share, and operating margin guidance.
In June of last year, Gap and rapper Kanye West announced a multi-year deal to create a clothing line using the entertainer's YEEZY line.
Syngal highlighted enthusiasm for the brand during the earnings call.
"Our newest Yeezy Gap icon, the Perfect Hoodie, delivered the most sales by an item in a single day in Gap.com history," she said.
Some retailers have seen their stocks plummet this week after reporting quarterly results impacted by supply problems along with rising labor and freight costs.
Urban Outfitters (URBN) shares declined 14% on Tuesday following the retailer’s quarterly results.
Abercrombie and Fitch's (ANF) stock saw its biggest daily decline since March 2020 yesterday after highlighting production and delivery delays for its latest quarter.