Gap shares tumbled more than 18% in premarket trading

Gap shares tumbled more than 18% in premarket trading."Significant" supply chain difficulties, particularly in Vietnam, led San Francisco-based Gap Inc. to lower its year-end guidance and miss earnings targets in its fiscal third quarter.

Gap's net sales were down 1% to $3.94 billion compared with $3.994 billion in the quarter ending Oct. 30 of 2019 — before Covid — and $3.998 billion a year ago.

The company estimated it took a $300 million hit to revenue owing to supply chain headwinds in its top sourcing country of Vietnam, which led the company to shift about 35% of its holiday product from sea to more costly air freight at a cost of about $450 million.

"While this has material impact to our profitability, we believe it is necessary to further mitigate sales losses and retain customers for the long term," said Chief Financial Officer Katrina O'Connell on an earnings call.