Gap to Layoff Around 1,800 Employees To Eliminate Extra Costs

Gap Inc. said today that it will terminate 1800 employees as part of a second wave of layoffs after those completed in September of last year. Due to the negative effects that rising inflation has been having on customers’ wallets, Gap has joined other US corporations in downsizing.

To cut costs and hasten the decision-making process, they have chosen to move forward with another layoff as part of their restrictive strategy. According to the SEC filing, the goal of these layoffs is to streamline and improve its operating model. They will affect the employees at its headquarters and higher fields. When these layoffs are finished by the first half of 2023, it is anticipated that they would save between $100 million and $120 million in employee-related and consultancy expenditures.

As was already noted, this is not the first time they are dismissing workers. Around 500 corporate employees from a variety of departments were let go by Gap in September of last year as the company battled weak sales and margin protection.  Nearly 95000 people were employed by the apparel chain, according to regulatory documents.

Along with the 500 corporate jobs already lost, there will be another 1800 cuts. On Thursday, Gap’s share increased to roughly half of a percentage point. Stocks of Gap have decreased 16% so far this year. The company’s market valuation is currently above $3.5 billion thanks to shares that have been trading above $9. Early trading saw a 2% increase in shares of the company that owns Banana Republic. 

As a result of staff reductions, which contribute to a drop in total tax from $100 million to $1210 million, Gap is anticipated to incur employee-related costs of between $75 million and $85 million. The personnel decrease must be finished by the beginning of the fiscal year 2023. In order to reduce expenses as much as possible, Gap has been battling sluggish sales.

The numbers are as follows: Net revenues for the fiscal year 2022, which concluded on January 28th 2023, decreased by 6% from the prior year to $15.6 billion. Additionally, year-over-year comparable sales decreased by 7%. Net sales of $4.24 billion in Q4 2022 were 6% less than they had been during the same period the year before, while comparative sales were 5% lower.

After Sonia Syngal resigned as chief executive officer last year, Gap’s chairman Bob Martin took over on an interim basis. Despite the departure of its previous CEO in July, the company has yet to appoint a permanent president. This resulted in a 23% decrease in the company’s shares last year.

In order to position themselves more competitively for the fiscal year 2023, Gap has taken swift and effective measures, such as eliminating excess inventory, improving product balance – particularly in the Legacy Navy – and achieving $550 million in year-to-date savings to benefit their cost structure. On March 9, 2023, Gap’s President and interim COO, Bob Martin, announced that he would review the company’s financial results for the fourth quarter of 2022.

Over the past year, the business has struggled with a decline in sales, bloated inventories, the termination of its partnership with rapper Ye, and a month-long search for a new CEO. Gap has said that it is attempting to flatten its organisational structure and streamline its operating model in order to save $300 million annually.

Gap announced a larger-than-anticipated fourth-quarter deficit in March and projects lower sales in 2023. Due to issues with inventories at its Old Navy Brand and decreased demand for its clothing, they have taken the same action. Consumers, particularly those from the low- to middle-income bracket, have reduced their spending on non-essential products, which has hurt sales of clothing from all four of Gap’s brands. 

The company’s San Francisco headquarters will house the majority of the positions that will be eliminated, according to interim CEO Bobby Martin. Additionally, he stated that employees with leadership positions outside of headquarters who work at regional stores will be affected by the layoffs in roles at upper field positions at headquarters. The people in head office and top field roles were told on 18 and 19, and the employees from the international division were alerted on Thursday and Friday. In the final week of May, employees who will lose their jobs in the finance sector will be informed. 

In recent months, several companies have announced layoffs, including Facebook’s parent company Meta, Platform Inc., Alphabet Inc., and clothing companies like Gap. These announcements were made in conjunction with a slowdown in the labour market, a trend that has persisted since the months following the onset of the pandemic. In March, US employers created only 236,000 jobs, which fell short of expectations, citing the Federal Reserve’s efforts to gradually raise interest rates over the course of a year as well as the continued impact of the financial market on the job market.