Gap is cutting 500 corporate jobs

Gap is cutting 500 corporate jobs

Gap Inc.

gps -4.42%

is cutting about 500 corporate jobs, according to people familiar with the matter, to cut expenses at the clothing retailer amid declining sales and profits.

The jobs are primarily at Gap’s main offices in San Francisco and New York, as well as in Asia, the people said. The company is laying off staff and eliminating positions that are currently open in a variety of departments. Some employees have been notified of the layoffs in recent days, the people said.

“We have allowed our operating costs to increase at a faster rate than our sales and, in turn, our profitability,” Bob Martin, Gap’s executive chairman and interim chief executive officer, wrote in a memo to employees Tuesday informing them of the changes. job cuts. according to a copy reviewed by The Wall Street Journal.

The company has endured years of declining sales at the flagship Gap brand and, more recently, trouble at the Old Navy chain, which accounts for more than half of total revenue.

Sales at Old Navy took a hit this year after an attempt to make clothing sizes inclusive failed, leaving it with surplus goods. The company is looking for a permanent CEO following the resignation of Sonia Syngal in July.

Last week, the company said it was ending a partnership with Kanye West to make Yeezy Gap-branded clothing, after West accused the company of breaching the 10-year agreement.

The job cuts are not related to the liquidation of the Yeezy Gap partnership. Gap plans to introduce items from Yeezy Gap that it has in the pipeline, meaning the label won’t go away right away, people familiar with the situation said.

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In August, Gap’s chief financial officer, Katrina O’Connell, told analysts that the company would look at ways to reduce spending and overhead, including pausing planned hiring.

Gap had about 8,700 employees at headquarters as of January 29, according to its annual report. In all, the company had 97,000 employees, most of whom were hourly workers in its stores.

Gap job cuts follow recent corporate layoffs at other retailers, including Walmart Inc.,

Abercrombie & Fitch Co.

y Fix stitch Inc.

Also, Bed Bath & Beyond Inc.

has said it plans to thin its corporate ranks amid a deep sales slump.

Retail sales have slowed from last year’s frenetic pace as consumers spend less on clothing and home goods and more on travel and dining. Inflation is making food, gasoline and other items more expensive, leaving less room in budgets for non-essential goods. That has caused inventories to pile up at many retailers, which is depressing profits as they offer discounts to clear products.

Gap, which also owns Banana Republic and Athleta, posted a $49 million loss in the three months ending July 30 from a $258 million profit a year earlier. Net sales fell 8% to $3.86 billion. Sales, excluding newly opened or closed stores, fell 10% in the period.

Its shares are down 60% over the past year through Monday’s close.

Email Suzanne Kapner at Suzanne.Kapner@dowjones.com

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