Bad news for GAP, the company’s shares have just dropped.
Gap’s CEO Glen Murphy just cut its 2011 earnings forecast by almost 25 percent. The cut caused Gap shares to drop more than 15%.
The company claims the rise of the price of cotton will increase the cost of making their clothing items by over 20% during the second half of the year. Hence the drop in sales later on.
Though the explanation sounds reasonable, many believe the drop in sales has to do with Gap’s bad fashion picks.
Many claim that Murphy has driven out most of Gap’s creative staff during the past two years which has resulted in poor fashion choices.
Gap better do something and fast if it wants to stay profitable.