Costing pressure is impacting Gap business

[Fibre2fashion]

Gap Inc reported that net income for the first quarter, which ended April 30, 2011, decreased 23 percent to $233 million compared with $302 million for the first quarter last year. Net sales decreased 1 percent to $3.30 billion, which includes the impact of the March 2011 earthquake and related events in Japan. Comparable sales, which includes associated comparable online sales, decreased 3 percent. First quarter diluted earnings per share was $0.40.

As stated earlier in the year, the company expects business performance during fiscal year 2011 to be heavily impacted by pressure from sourcing cost inflation, particularly in its value channels. While the company anticipated that the cost of goods would increase during the back half of the year, costs are actualizing above the initial estimates. The company now expects product costs per unit to be up about 20 percent in the back half of the year, which will more than outweigh retail price increases. As a result, the company has revised guidance for fiscal year 2011 diluted earnings per share to be in the range of $1.40 to $1.50.

 

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