Gap Inc on Thursday forecast full-year sales below Wall Street estimates, signaling a slowdown in demand as inflation-weary consumers curb discretionary spending.

Shares of the company fell about 7 percent in extended trading.

With the Federal Reserve prepared to raise interest rates more than expected in an attempt to control inflation, consumers, especially at the lower- to mid-income rung, have turned more cautious and curbed spending on non-essential items like apparel.

Gap is also seeing a slowdown in demand for casual and active wear as people returning to work and social occasions prefer more formal clothing, pants and dresses.

The company also said president and chief executive officer of Athleta, Mary Beth Laughton, was exiting the business, effective on Thursday.

Gap, also the owner of the Banana Republic brand, expects fiscal 2023 net sales to decrease in the low to mid-single digit, compared with analysts’ expectations of 1.64 percent rise.

By Ananya Mariam Rajesh

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