Gap lost $300 million in sales because of supply chain mess

Gap said it lost $300 million in sales heading into the holiday season because of Covid-related factory closures, and backlogs at ports that significantly stalled its ability to get merchandise into stores on time.

“While we had planned into the known supply chain constraints …. the shock to our business persisted longer than anticipated as weeks turned into months, Gap CEO Sonia Syngal said Tuesday during the company’s third quarter earnings call with analysts.

Gap shares tumbled 21% Wednesday on the news.

Syngal said factories in Vietnam that produce clothing and shoes for Gap were closed for several weeks over the summer because of a second wave of a coronavirus outbreak. As much as 30% of Gap’s production takes place in Vietnam.

“The 2.5-month closure of our top manufacturing country, Vietnam, as well as port congestion both affected our ability to fully meet strong customer demand,” said Syngal.

Gap Inc., which operates Gap, Old Navy, Banana Republic and Athleta stores under its corporate umbrella, said it now expects to also lose between $250 million and $350 million in sales in the fourth quarter from supply chain disruptions.

Old Navy,which is among its best-performing brands in terms of sales, was the most impacted by Vietnam factory closures — particularly for its women’s products, said Syngal.

Gap has taken steps to mitigate holiday product delays, she said, including spending $350 million to air freight 35% of this year’s holiday merchandise. It also, where possible, routed some inventory to East Coast ports to bypass the congestion in ports on the West Coast.

If there is a bright spot, it’s the Gap Yeezy line, launched in collaboration with Kanye West.

Syngal said the label’s $90 Yeezy hoodie, the second item in the collection which launched in September, delivered the most sales by an item in a single day in Gap.com’s history.

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