Gap Inc. has had a rough month. The company's sales numbers are down, they've sacked their top designer, and Jon Caramanica likened their cargo shorts to a dog's chew toy. But the worst is still yet to come, reports Women's Wear Daily:
The San Francisco-based apparel retail giant warned Thursday that its bottom line in the second half will be “heavily impacted” by rising product costs as it pulled its full-year earnings guidance down more than 22 percent.
Owing to rising costs in fuel and materials (the skyrocketing price of cotton is one the culprits), Gap has slashed their earnings outlook to $1.40 to $1.50 a share, down from the $1.88 to $1.93 range provided in February. They didn't see this coming, apparently:
Gap chief financial officer, Sabrina Simmons, acknowledged a miscalculation on the company’s part. “We had made the assumption [in February] that our fall buys would be the most expensive, and that we’d get some easing in our holiday buys,” she said. “And it turns out we were just absolutely wrong on that assumption. Holiday got worse, and that costing came in much higher than we expected, and higher than fall.”
What's more, Gap will have to increase their retail prices to make up for lost ground, which will make customers cranky too. Luckily for them (sort of), they won't be the only store to do so: Lots of other retailers (Wal-Mart and Target, for example) are raising prices for similar reasons. Happy shopping, everyone!