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Author: Alan LittleDate: 2022-03-07

Gap (GPS) shares rise on forecast for strong full-year profit

Gap (GSP) eked out share gains in New York on Friday, rising 0.070% on its narrower-than-anticipated Q4 loss and forecast for full-year profits in 2022.

Gap (GPS) closed Friday’s session higher following a late rally in New York after the clothing company said that it would bounce back from its Q4 loss to post strong profits in 2022.

Before trading got underway, Gap delivered a $0.02 per share loss for the latest quarter, which was 12 cents better than the -$0.14 Wall Street consensus.

Group revenues eased 2% higher to $4.5bn as more consumers bought more of its Athleta and Old Navy branded clothing, though that figure was 3% lower than pre-pandemic levels.

While the top and bottom-line numbers for the latest three-month period were not eye-catching, investors were pleased to see Gap guiding for a healthy profit for the current financial year.

The San Francisco-based business said that adjusted profits will rise to between $1.85 and $2.05 per share in 2022, which is a ballpark range that beat forecasts.

Gap will be aided in its quest to bounce back into the black by a drop in air freight costs, which will be around 20% to 25% lower this year and help to ease overall margin pressures.

Like other companies in clothing and retail, Gap has struggled with supply chain issues and labour costs, but its plans to boost its inventory and increase levels of in-store stock should mitigate problems in the short term.

CEO Sonia Syngal said that sales were “muted” in Q4 due to the headwinds but that the situation will improve from the summer onwards.

BMO Capital Markets analyst Simeon Siegel is still sceptical though after stating that the “path up” may not be “as easy as guidance may suggest”.

Gap just about eked out share gains on Friday as a late bump saw its shares finish 0.070% higher at $14.24.

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