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Gap Stock Slumps On Wider Q1 Loss, Grim Profit Outlook As Shoppers Shun Casual Apparel

"Supply chain challenges and persistent delays significantly limited the brand's responsive abilities" to changing consumer trends, CEO Sonia Syngal told investors Thursday.

Updated at 9:52 am EST

Gap Inc  (GPS) - Get Gap Inc. (The) Report shares tumbled Friday after the casual clothing retailer posted a wider-than-expected first quarter loss while slashing its full-year profit forecast.

Gap, which also operates the Old Navy and Banana Republic brands, said it sees full-year earnings of between 30 cents and 60 cents per share, down from its prior forecast of a $1.85 to $2.05 pe share range, as shoppers shift spending to more upscale and formal apparel retailers. 

For the three months ending in April, Gap posted a loss of 44 cents per share on revenues of $3.5 billion.

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"When spring product finally began to arrive in March it became apparent we also had product acceptance issue," CEO Sonia Syngal told investors on a conference call late Thursday. "However, supply chain challenges and persistent delays significantly limited the brand's responsive abilities."

"Reverting to a longer inventory push model, not only diluted economic value, but meant we were defining customer trends too early in the process and we're unable to chase into the right fashion choices closer in," she added.

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Gap shares were marked 5.75% lower in early Friday trading to change hands at $10.48 each, a move that would extend the stock's year-to-date gain to around 43%.

Gap's results, as well as its near-term outlook, contrast sharply with the better-than-expected April quarter reports from retailers such as Macy's M and Nordstrom JWM, each of which caters to a customer base that appears to be focused on more formal fashion choices heading into the first summer without pandemic restrictions in more than two years.

Macy's CEO Jeff Gennette said the group saw a "notable shift back to occasion-based apparel and in-store shopping, as well as continued strength in sales of luxury goods" as it forecast stronger-than-expected full-year earnings of $4.53 to $4.95 per share after its first quarter profit beat.

Nordstrom, meanwhile, recorded $3.57 billion in April quarter sales, up 18.7% from last year, and said it sees adjusted earnings in the region of $3.38 and $3.68 per share, with sales rising as high as 8% from 2021 levels, for its full financial year.

"We also saw robust demand for wardrobe refreshes, especially for the spring and summer seasons," said chief brand officer Peter Nordstrom. "Shoes had a strong double-digit growth with increased demand across formal, casual, and athletic styles."

That said, inflation, input cost pressures and supply chain snarls have taken their toll on the U.S. retail sector this quarter, culminating in disappointing first quarter earnings and outlooks from giants Walmart  (WMT) - Get Walmart Inc. Report, Target  (TGT) - Get Target Corporation Report and Amazon  (AMZN) - Get Inc. Report this month.

The S&P 500 Retailing Group is down around 23.67% so far this quarter, its worst performance since 1990, as investors expect more pain to come from both the Fed's rate-based inflation fight and the highest nominal domestic gas prices on record, which continue to pinch household budgets and discretionary spending.

U.S. retail sales growth steadied in April, data from the Commerce Department indicated earlier this week, as record high gas prices and surging inflation failed to deter spending in the world's biggest economy.