The Reuters-Gap Inc cut its annual sales and profit forecasts on Thursday, becoming the latest U.S. retailer to come under pressure from soaring costs and poor demand in the face of decades-high inflation.
The company's shares fell more than 15% in extended trading, widening the company's slump of around 37% this year.
Retailers including Target Corp and Walmart warned of tough times ahead as rising prices of essentials force consumers to limit spending on clothing, accessories and big-ticket purchases.
Gap said increasing costs of air freight and deeper discounts at Old Navy dragged its first-quarter gross margins by 930 basis points to 31.5%.
Growth at Gap Brand was negatively impacted by the COVID-related forced lockdowns and slowed demand in China, the company said in a statement.
According to Refinitiv IBES, the profit between 30 cents and 60 cents per share for fiscal 2022 is lower than the analysts' average estimate of $1.34, as it now expects to be between 30 cents and 60 cents per share on an adjusted basis.
The Banana Republic parent expects full-year revenue to fall in the low to mid-single-digit range, compared to the low single-digit range growth it predicted earlier in the day.
The San Fransisco-based company has a dismal forecast that comes in tandem with American Eagle Outfitters and Abercrombie Fitch Co, which have also projected weaker profits for the year.
American Eagle trimmed its operating profit forecast on Thursday and said demand in the first quarter was well below its expectations, sending its shares down nearly 5%.
American Eagle Chief Executive Jay Schottenstein said in hindsight, our plans for the year were too optimistic.
Gap's net sales fell to $3.48 billion in the three months to April 30 from $3.99 billion a year ago, just a bit above estimates of $3.46 billion.