Fashion retailer Gap cut its annual profit forecast by 23 per cent as costs to make clothes soar.
The figure dropped to $233m (£143.5m), compared with $302m in the first quarter of 2010.
Costs of goods have risen even higher than initially estimated, Gap said.
“We are disappointed in our quarterly performance, however remain invigorated by the opportunities ahead.
“We’re focused on making the necessary adjustments across the business to deliver the kind of sales we should expect from our brands,” said Glenn Murphy, chairman and chief executive officer of Gap.
The San Francisco-based company said net sales were impacted heavily by the Japan earthquake and decreased by one per cent to $3.30bn.