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Gap’s margins rise as it shrugs off effects of distribution facility fire

Friday, October 7, 2016 7:57
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Gap Inc (NYSE:GPS) shares surged on the back of September sales that showed margins on the rise.

September merchandise margin rates were significantly higher than had been previously forecast, which more than offset the estimated earnings impact from lost sales and increased logistics costs during the month that resulted from the a fire at its distribution facility in Fishkill, New York.

Sales in September eased to US$1.43bn from US$1.45bn the year before, with like-for-like (LFL) sales down 3% year-on-year.

LFL sales would have been flat, however, had it not been for a fire at the Fishkill facility. The group said it expects this month’s LFL sales will be depressed by three percentage points as a result of the Fishkill fire.

“While we remain focused on performance across the portfolio, we are pleased to see a strong customer response to Old Navy’s product assortment, which continues to drive positive momentum at our largest brand,” said Sabrina Simmons, chief financial officer of Gap.

Sales at Old Navy were up 4% year-on-year, with the Fishkill fire knocking a couple of points off that growth rate.

Shares were up 15% at US$26.20 in the first hour of trading.

Story by ProactiveInvestors


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