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Gap CEO Sonia Syngal defends air freight spending to compete for vacation

Gap CEO Sonia Syngal on Tuesday defended the clothing retailer’s investments in air freight, telling CNBC’s Jim Cramer that the near-term profitability impacts were worth considering ahead of the crucial season holiday shopping.

In an interview with “Mad Money” after Gap’s disappointing quarterly results, Syngal said the company decided to take these expensive transport measures to overcome what turned out to be longer-than-expected Covid shutdowns in the past. Vietnamese factories.

“We think the right thing to do is compete during the holiday season to have the right stock in our four brands, and that’s what we are doing,” Syngal said, referring to Old Navy, Gap, Banana Republic and Athleta. .

Gap is far from the only retailer facing inventory issues as global supply chains remain disrupted by factors related to the pandemic. Nonetheless, Syngal said supply constraints weigh on Gap.

“About half a billion in sales [revenue] affected by stockouts and about half a billion in transitional air costs that we incur “to ensure that products reach their intended end markets,” she said.

Gap shares plunged 16% in extended trading on Tuesday as Wall Street reacted to the company’s weak third quarter results and expected changes. Gap gained 27 adjusted cents per share, against estimates of 50 cents, according to Refinitiv. Sales of $ 3.94 billion were lower than the expected $ 4.44 billion.

The company also lowered its full-year sales and profit forecast, both of which are now shown below, where analysts polled by Refinitiv had expected.

“I’d much rather have a supply problem than a demand problem… and that’s what we’re sailing,” Syngal said. The CEO acknowledged that she was “disappointed in this particular quarter”, but stressed that it was “attention and support for our client and competition on vacation”.

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