March 26, 2020 / 9:46 PM / 5 days ago

Gap pulls forecast, suspends dividend, taps $500 million credit as coronavirus bites

A closed Gap store is pictured in Times Square following the outbreak of Coronavirus disease (COVID-19), in the Manhattan borough of New York City, New York, U.S., March 23, 2020. REUTERS/Carlo Allegri

(Reuters) - Gap Inc (GPS.N) on Thursday withdrew its full-year forecast issued just two weeks ago, suspended its dividend and said it will draw down on its entire $500 million credit facility as the apparel retailer looks to weather the coronavirus crisis.

The disruptions caused by the health crisis mark the latest headache for newly named Chief Executive Officer Sonia Syngal as she tries to revive demand for its apparel in a competitive market plagued by slowing footfall in malls.

Several retailers have warned of a sales hit due to store closures and restrictions imposed to slow the spread of the virus in China and now in the United States and other parts of the world.

Gap last week temporarily shut of all of its North American stores. [nBw47yt1Ca]

The company previously expected 2020 adjusted earnings in the range of $1.80 to $1.92 per share after accounting for a $100 million sales hit in Asia and Europe. The retailer said it would provide an update during its first-quarter conference call in May.

Syngal said in a statement that the company was taking the steps to further strengthen its financial liquidity and flexibility “in this time of unprecedented disruption to the retail sector.”

The company will also reduce capital expenditure by nearly $300 million during the year, as well as review all operating expenses to curb spending.

Reporting by Saumya Sibi Joseph in Bengaluru; Editing by Ramakrishnan M. and Sriraj Kalluvila

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