Rising commodity prices hit Gap profits
20 May 2011 11:22
Fashion group Gap has issued a disappointing trading update that shows profits hit by higher-than-expected sourcing cost inflation.
In the quarter ending April 30th the company reported net income down 23%, with net sales down just 1% and like-for-like sales down 3%. In its trading statement, Gap said:
"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% in the back half of the year, which will more than outweigh retail price increases."
Chairman and chief executive Glenn Murphy commented: "While we acknowledge that costing pressure is impacting our business, we're working hard to navigate this short-term macro challenge to our profitability in the current fiscal year.
"That said, our strategy remains the same – to deliver consistent, steady growth in North America while investing in our long-term global initiatives, especially in online and international."
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