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Gap Inc. Lays Off 10% of Its Corporate Workforce

The cuts include jobs at Gap, Old Navy and Banana Republic, as the American retail giant scrambles to weather the crisis of Covid-19.
Gap Store | Source: Shutterstock
By
  • Chavie Lieber,
  • Cathaleen Chen

NEW YORK, United States — Gap Inc. is laying off at least 10 percent of its corporate employees, BoF has learned, as the apparel retailer scrambles to conserve enough cash to weather the economic crisis triggered by the coronavirus pandemic.

Multiple sources confirmed the layoffs, which were announced at a company-wide meeting last week. They said the cuts affect a number of different departments across the company's portfolio, which includes Gap, Banana Republic, Old Navy, Athleta, Hill City, Intermix and the recently acquired kidswear brand Janie and Jack. Within the Gap brand, many members of the design and concept team were let go.

Layoffs began during the last week of April and could extend through early May. The San Francisco-based company has about 12,000 employees working at its corporate level.

"We are taking steps to prudently manage expenses while positioning the company to emerge from this environment and win," Gap told BoF in a statement. "This work includes reducing headcount across our corporate functions, as we develop a more efficient operating model in response to the evolving needs of the business and the economic impact of COVID-19."

Gap has come under enormous financial strain during the pandemic, which has forced the apparel retailer to close most of its 3,300 stores. The company furloughed about 80,000 retail employees in March. It said it would withhold $115 million in rent payments for April, renegotiate leases and close unprofitable stores. Earlier this week, the brand announced it would borrow $2.3 billion, secured by its intellectual property and real estate.

The Gap brand also cancelled its summer and fall orders in early April, BoF reported, as it struggled with the losses from its shuttered stores.

“Stores are the lifeblood of our business and while we are still operating our e-commerce channels, they simply cannot make up for having our stores closed,” read an email sent to vendors and seen by BoF.

Gap joins scores of fashion brands reeling from the lockdowns imposed by governments worldwide to contain Covid-19. Companies of every size, from global retail giants like Sephora to start-ups like Away, have laid off employees in order to remain afloat. Fellow mall staples like J.Crew, Neiman Marcus and J.C. Penney are reportedly preparing to file for bankruptcy.

Like those retailers, Gap was struggling long before the pandemic hit. Its namesake brand, once a mall linchpin that was hailed for its denim, casual T-shirts and clever commercials has tried and failed for years to reverse shrinking sales and waning consumer interest. Cheaper, more-fashionable alternatives like Zara and H&M stole market share from its basics business, and efforts to find a new brand identity have largely fallen flat. In 2019, Gap Inc.'s three biggest brands – Gap, Old Navy and Banana Republic — saw negative comparable sales growth, even as they offered deep discounts to drive customers into stores.

Over the years, Gap Inc. has trimmed the retail footprint of Gap and Banana Republic while looking to more successful brands in the portfolio, including Old Navy and Athleta, for growth. Old Navy, Gap Inc.'s lower-priced chain, is the company's strongest brand with $7.3 billion in net sales in fiscal 2019. Gap and Banana Republic brought in $2.7 billion and $2.1 billion, respectively. In November 2019, former chief executive Art Peck stepped down; he was replaced in March by Sonia Syngal, who had served as CEO of Old Navy for four years.

For months, the company teased a spinoff of Old Navy. But Old Navy faced its own challenges in 2019, posting consecutive quarters of negative comparable sales growth. In January, Gap Inc. called off plans for the spinoff, citing the "cost and complexity" of such an endeavour.

Several current and former employees have said Gap Inc. had been weighing its options for the Gap label for some time, including closing or selling it. But the company has settled on another attempt to revitalise the brand.

Earlier Friday, Gap Inc. announced a strategic partnership with IMG to license Gap brands, including Banana Republic and its kidswear label Janie and Jack, for new product offerings beyond the apparel category. As part of the multiyear licensing agreement, IMG would use Gap brand intellectual property to manufacture products like furniture and home decor.

One bright spot remains for the company: Athleta, its Lululemon rival brand, saw comparable sales grow 5 percent in 2019 – the only Gap label to see positive growth last year. The activewear company saw a 23 percent compounded annual growth rate between 2012 and 2018, thanks to the rise of boutique fitness and its accompanying fitness apparel boom.

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