Dive Brief:
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Gap Inc. is scrambling to meet online orders and move inventory to stores after a major fire enveloped its Northeast region distribution complex last week. The company is shipping goods from stores in the region as well as from warehouses in Ohio and Tennessee.
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The cause of the fire in Fishkill, NY is still under investigation, but the blaze damaged about 25% of one building beyond repair and caused major smoke and water damage. Insurance inspections could take weeks, according to the Wall Street Journal.
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The Fishkill distribution complex represents 10% of Gap's nationwide warehouse capacity, the Journal reports.
Dive Insight:
The fire in the Poughkeepsie area comes at a bad time for Gap Inc., which like many retailers is ramping up for the holidays and struggling to gain traction in its turnaround.
Poonam Goyal, an analyst at Bloomberg Intelligence, told Bloomberg that the retailer can recover from the blow, but that it will hurt nevertheless. “I definitely think it’s going to have impact on sales,” she said. “There’s definitely going to be some disruption.”
It’s just the latest in a string of setbacks facing Gap. The company recently reported adjusted second quarter earnings of 60 cents per share, compared to 64 cents a share a year ago. Q2 sales were $3.85 billion, down from $3.90 billion year over year. Gap also lowered its fiscal year guidance and said it expects adjusted earnings between $1.87 and $1.92 per share for fiscal 2016, missing FactSet analysts expectations of $1.95 per share.
Gap CEO Art Peck noted on a conference call following the earnings announcement that Gap has suffered with customers because of inconsistencies in fit, an issue that has also created a problem of returned merchandise, especially for online orders, and wreaked havoc with the supply chain.
