Gap said its chief executive was stepping down after just over two years leading the struggling retailer, and also warned profit margins in its latest quarter would be flat at best.

The apparel retailer said Sonia Syngal, who became CEO in March 2020 after previously leading the company’s Old Navy business, was stepping down from her position effective immediately. Gap said a search was under way for a replacement, but executive chair Bob Martin would serve as CEO in the interim.

Gap shares sank 3.5 per cent in after-hours trading on Monday following the announcement, which was accompanied by an earnings update that indicated some of the company’s struggles with sales and profits during the pandemic had continued in its most recent quarter.

The retailer said it took a “more aggressive approach” to balancing its merchandise offerings that resulted in increased promotional activity during the quarter. This has cut into gross margins and Gap went on to say it anticipates adjusted operating margin percentage to be “zero to slightly negative” in its second quarter.

Gap said it still expected net sales in the quarter to be down by “high single-digit range”, which was “relatively in-line with its prior expectations.” The company still forecast a $50mn hit from “transitory” air freight expenses and inflationary costs on raw materials and freight.

The retailer has missed analysts’ quarterly revenue and profit targets several times during the pandemic as it tried to find success in an apparel market reshaped by Covid-19 and fast fashion brands.

Syngal, who had an 18-year career at Gap, becomes the second CEO of a high-profile US retailer to leave their company in as many weeks. Mark Tritton in late June was ousted as CEO of Bed Bath & Beyond following another decline in quarterly sales