Photographer: Craig Warga/Bloomberg

Gap Reroutes Products to Cope With Distribution-Center Fire

Updated on
  • Damaged facility delivers to the key Northeast region
  • Gap’s sales also fell more than projected last month

Gap Inc., which suffered a fire at its Northeastern distribution center this week, is rerouting deliveries and boosting staff at its other facilities to cope with the fallout.

The company hasn’t determined the cause of blaze, which didn’t harm any employees, according to a statement Thursday. The fire struck the smaller building on its campus in Fishkill, New York, on Monday, sparing the larger facility, Gap said. The bigger building is expected to be operational again soon.

“Gap Inc. has activated extensive contingency plans designed to help mitigate the overall impact to the business,” the company said in the statement. “This includes leveraging the company’s large North American network of distribution centers, as well as ship-from-store capabilities, to fulfill demand in the impacted Northeast region of the U.S.”

The fire dealt a blow to a company struggling to pull out of a slump. The San Francisco-based chain said on Thursday that same-stores at its Gap locations declined 5 percent in August, worse than the 1.5 percent drop analysts had predicted.

The news drove shares down as much as 3.9 percent to $23.60 in New York on Friday. The stock has erased its gains for the year, and is now down 0.6 percent through the close of trading Thursday.

Assessing Damage

The Fishkill center primarily fulfills online orders in the Northeast region for Gap and Old Navy, as well as distributing products to Gap, Banana Republic and their outlet stores in the region. The campus doesn’t service the Intermix or Athleta brands.

While the retailer assesses the extent of the damage to the distribution center, it’s filling orders from its store fleet and other distribution centers in places like Tennessee and Ohio. The company is also rerouting inbound products to other distribution hubs and exploring the use of temporary facilities in the Northeast.

Gap should be able to weather the fire disruption, but it will put further pressure on results, said Poonam Goyal, an analyst at Bloomberg Intelligence.

“I definitely think it’s going to have impact on sales,” she said. “There’s definitely going to be some disruption.”

(Updates with share price in fifth paragraph.)
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