Gap (NYSE:GPS) CEO Sonia Syngal on Tuesday defended the apparel retailer’s air freight investments, telling reporters the near-term profitability impacts were worth taking ahead of the crucial holiday shopping season.
In the interview, which aired after Gap’s disappointing quarterly results, Syngal said the company decided to take those costly transportation steps to overcome what proved to be longer-than-expected COVID closures in Vietnamese factories.
"We believe the right thing to do is compete in the holiday season to have the right stock across all four of our brands, and that’s what we’re doing," Syngal said, referring to Old Navy, Gap, Banana Republic, and Athleta.
Gap is far from the only retailer dealing with inventory problems, as global supply chains remain unsettled by pandemic-related factors. Nevertheless, Syngal said supply-related constraints are weighing on Gap.
"About a half billion top line [revenue] affected by stock out, and about a half billion of transitory air costs that we’re incurring" to ensure products arrived at their intended end markets, she said.
Gap shares tumbled to earth $4.78, or 20.4% to $18.71in early trading on Wednesday as Wall Street reacted to the company’s weak third-quarter results and forecast changes. Gap earned an adjusted 27 cents per share, compared with estimates of 50 cents. Sales of $3.94 billion fell short of the expected $4.44 billion.
The company also lowered its full-year guidance for sales and earnings, both of which now check in below where analysts had projected.
