By Michael Dabaie

Gap Inc. shares were down 21.5% to $18.46 in morning trading after the company's quarterly results were hit by supply-chain issues.

The parent of Old Navy, Gap, Banana Republic and Athleta after the closing bell Tuesday reported third-quarter net sales of $3.9 billion, down 1% compared with 2019 with supply-chain disruption driving an estimated eight percentage point negative impact due to constrained inventory. Sales missed FactSet consensus of $4.4 billion. Adjusted EPS of 27 cents missed FactSet's 49 cents consensus.

Global supply-chain disruption, including Covid-related factory closures and continued port congestion, caused significant product delays in the third quarter, the company said.

Gap said meaningfully reduced inventory positions throughout the quarter negatively affected sales as brands were unable to fully meet strong consumer demand.

The company said supply-chain constraints continue, but it is using increased air freight and port diversification to navigate ongoing delivery challenges for the holiday period.

"While we aspire to improve our on-time deliveries for holiday by adding air capacity and utilizing alternate ports, the supply-chain situation continues to be volatile. Newly opened Vietnam factories are behind on holiday production ramping up slowly, ongoing port delays are worsening, and air charters are causing new airport congestion," Chief Financial Officer Katrina O'Connell said during the company's conference call.

Gap cut its 2021 guidance to EPS of 45 cents to 60 cents, from earlier forecast of $1.90 to $2.05 from August. The company guided for adjusted EPS of $1.25 to $1.40, down from the August forecast of $2.10 to $2.25. For net sales, the company said it now expects full-year growth to be about twenty percent versus fiscal year 2020. Gap earlier forecast growth of about 30%.

"We were surprised by GPS' significant 3Q sales and EPS miss in what has been an earnings season characterized by modest to material beats. Additionally, lowered FY guidance assumes an even greater slide in 4Q to an EPS loss, despite stepped-up efforts to air product/curb supply chain headwinds," MKM Partners said in an analyst note.

"We continue to see many potential catalysts on the horizon, though they could take some time to play out. These include investments in marketing, technology, loyalty program and brand-specific initiatives such as inclusive sizing," MKM said.

J.P. Morgan cut shares to Neutral from Overweight. The firm said heavy margin lifting is offset by more than "transitory" items.

Gap said it expects its reported operating margin for fiscal 2021 to be about 4.5%, with adjusted operating margin expected to be about 5%, on track to achieving a 10% operating margin by the end of 2023.

J.P. Morgan said in its note that from EBIT margin guidance of about 5% this year, it sees the path to 10%, or 500bps of expansion over the next two years, as more challenged.

Write to Michael Dabaie at michael.dabaie@wsj.com