(Reuters) – Gap Inc on Thursday forecast annual earnings above estimates, betting on strong demand for jeans and shirts from its Old Navy and Athleta brands as a decline in Omicron cases encourage Americans to venture out more.
Shares in the company rose 15% to $16.37 in extended trading.
Many U.S. apparel chains have been struggling to keep up with rising demand though, as shipments get delayed due to port congestion and tight capacity.
Gap also said it is tackling near-term supply snags that hurt holiday-quarter results, while its sales forecast for the first quarter came in below expectations.
It expects net sales to decline in the mid- to high-single-digit percentage range, while analysts project a 3.8% decline, according to Refinitiv IBES.
Gap even had to use pricier air freight to bring in goods, but the company is optimistic about its performance going into the year as factories reopen in the key manufacturing hub of Vietnam and supply issues gradually ease.
The company expects inventory at the end of the first quarter to increase in the mid-20s percentage range from a year earlier, as the apparel chain stockpiles to counter longer in-transit times.
San Francisco-based Gap forecast fiscal 2022 adjusted earnings per share between $1.85 and $2.05, compared with $1.44 in 2021. Analysts expect $1.86.
The strong forecast from Gap contrasts those from rivals Abercrombie & Fitch Co and American Eagle Outfitters Inc, who have warned of heavy freight expenses pressuring earnings this year.
(Reporting by Praveen Paramasivam and Uday Sampath in Bengaluru; Editing by Devika Syamnath)
