Gap Shares Slide as Retailer Warns Cash Levels May Not Be Sufficient to Fund Business Amid Coronavirus Shutdowns

'There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have,' Gap said in an SEC filing Thursday.
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Gap Inc.  (GPS) - Get Report shares tumbled Thursday after the struggling fast fashion retailer said it expects a 'material' earnings hit from the coronavirus pandemic and warned that cash from operations might not be able to fund the business going forward.

Gap said in a Securities and Exchange Commission filing that its cash and short-term investments, which totaled $1.7 billion on February 1, will likely fall to between $750 million and $850 million at the end of its fiscal first quarter, which ends on May 2. As a result, the company said it will  attempt to preserve its cash position by deferring capital spending or refinancing debt.

The group also said it may face longer-term store closures, and other operational restrictions, as the coronavirus pandemic keeps lockdowns and stay-at-home orders in place in major economies around the world.

"As we continue to manage through the impacts of the COVID-19 pandemic in fiscal 2020, it continues to negatively impact our operations and liquidity," the company said. "There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impacts of the outbreak on our business, and the steps we may need to take to address those impacts, are highly uncertain and subject to change."  

Gap shares were marked 0.42% lower in early trading Thursday to change hands at $7.09 each, a move that would extend the stock's year-to-date decline to around 60%.

Last week, Moody's Investors Service lowered its credit rating on Gap to Ba1, the highest 'junk status' level, citing a "steady decline in Gap's cash flow from operations and credit metrics as well as the anticipated disruption of the Covid-19 virus in the face of unprecedented temporary store and mall closures."