By
with contributions from Debra Borchardt
 on October 6, 2016
Gap Inc

An August blaze at Gap Inc.’s Fishkill, N.Y., distribution center — which was ruled arson and destroyed 12 million units — pushed the company’s comparable-store sales into negative territory last month.

Gap said its September comps fell 3 percent, compared with a 1 percent fall a year earlier, but that comps would have been flat without impact of the fire.

However, Gap said its September merchandise margins ended up being better than expected, which “more than offset the estimated earnings impact from lost sales and increased logistics costs during the month that resulted from the Fishkill distribution center fire.”

In 2014, Gap said a total of $96 million in capital spending would be dedicated to the two-building facility in Fishkill, creating 1,200 jobs by 2019. But the center suffered a setback Aug. 29, when fire hit 1.3 million-square-foot building at the site. The New York State Police and the Bureau of Alcohol, Tobacco, Firearms and Explosives said last month that the fire was incendiary in nature and “intentionally set.”

The lingering impact of the blaze is expected to also shave about 3 percentage points off the company’s comps this month.

A Gap spokesman on a recorded call said that goods that were destroyed were mostly destined for the Gap brand’s e-commerce site.

Gap brand’s global comps fell 10 percent for the month, but the company said they would have been down about 5 percent without the fire, or flat versus a year earlier.

Banana Republic September comps were down 9 percent, but would have about 6 percent without the fire, and improvement from the 10 percent drop a year ago.

And Old Navy comped up 4 percent for the month, but would have been up about 6 percent without the disruption, ahead of the 4 percent comp gain a year ago.

Sabrina Simmons, Gap’s chief financial officer, said, “While we remain focused on performance across the portfolio, we are pleased to see a strong customer response to Old Navy’s product assortment, which continues to drive positive momentum at our largest brand.”

Gap’s net sales for the month fell 2 percent to $1.43 billion from $1.46 billion a year ago.

L Brands Inc. also weighed in with September sales, showing a business that is stronger than Gap’s, but nonetheless slowing its pace.

The company’s net September sales increased 6 percent to $971.4 million for the five weeks ending Oct. 1 over last year’s $919.9 million. Even though comparable sales for both stores and e-commerce rose 3 percent, they marked a slowdown from last year’s comp sales increase of 8 percent.

Comp sales for just the stores, excluding direct sales, in September dropped to an increase of 1 percent from last year’s rise of 9 percent. Amie Preston, chief investor relations officer, said on the company’s recorded call that the September merchandise margin rate was down significantly compared to last year, but gave no detail as to how much.

In the Victoria’s Secret category, strength in the Pink business was offset by declines in lingerie and the beauty business, which is being repositioned. In addition, the exiting of the swim and apparel businesses also negatively affected the gains of Pink.

Preston said the margin rate for Victoria’s Secret was hurt by promotional events meant to drive key categories and manage inventory.

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