Massive Gap (GPS) Distribution Center Fire Creates More Uncertainty -Wells Fargo

August 30, 2016 4:09 PM EDT
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Gap, Inc. (NYSE: GPS) distribution centers (DC) in Fishkill, NY caught on fire on Monday night and waged until Tuesday morning - requiring a response from more than 20 local fire departments. As of now, the entire campus is shut down while an investigation into the cause is conducted.

According to Wells Fargo analyst Ike Boruchow, the 990,000 square foot structure is one of only 4 domestic DC's that GPS owns (they own a total of 8.6 million square feet of distribution space across six DC's, and lease additional 1.2 million across another six facilities) and represents about 10% of their total (owned and leased) distribution space.

The center was likely a primary supplier to the high-volume Northeast region, and they would be concerned that this could create a meaningful bottleneck giving the upcoming critical holiday season.

In addition, this disruption to their supply chain could require incremental shipping, storage and distribution costs, in addition to any write-downs of damaged inventory and the cost of the property damage.

He said while it too early to determine what the overall impact to GPS' business will be going forward, but if nothing else, this certainly creates more uncertainty regarding the stability of their domestic business.

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