Gap CEO Sonia Syngal defended the clothing retailer’s air freight investment on Tuesday, telling CNBC’s Jim Cramer that the recent earnings impact is worth considering before the critical holiday shopping season.
In an interview with “Mad Money” after Gap’s disappointing quarterly results, Syngal stated that the company decided to take these expensive transportation measures to overcome the problem of the Vietnamese factory closing longer than expected due to Covid.
“We think the right thing to do is to compete for the right inventory of all four of our brands during the holiday season, and this is what we are doing,” Syngal said, referring to Old Navy, Gap, Banana Republic and Athleta.
Gap is far from the only retailer dealing with inventory issues, as the global supply chain is still affected by pandemic-related factors. Nevertheless, Syngal said that supply-related restrictions are putting pressure on Gap.
“Approximately $500 million top line [revenue] She said that due to the impact of the shortage and the temporary air freight cost of approximately RMB 5 billion incurred by us to ensure that the products reach the expected end market.
As Wall Street reacted to the company’s weak third-quarter performance and forecast changes, Gap’s stock price plummeted 16% in after-hours trading on Tuesday. According to Refinitiv’s data, Gap adjusted earnings per share of 27 cents, compared with expectations of 50 cents. Sales were 3.94 billion U.S. dollars, lower than expected 4.44 billion U.S. dollars.
The company also lowered its full-year sales and earnings forecasts, both of which are now below the expectations of analysts surveyed by Refinitiv.
“I would rather have a supply problem than a demand problem… This is the problem we want to solve,” Singal said. The CEO admitted that she was “disappointed in this particular quarter” but emphasized that “everything is focusing on and supporting our customers and competing in the holidays.”
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