Gap to put off 1,800 staff

Gap will lay off about 1,800 employees, greater than 3 times as many as the five hundred layoffs it announced in September, as a part of a broad effort to chop costs and streamline operations, the corporate said Thursday. 

The layoffs will affect roles at Gap’s headquarters locations together with upper field positions, or staff reminiscent of regional store leaders who hold leadership titles outside of a headquarters office, the corporate said. CNBC reported Tuesday that the corporate would lay off greater than 500 employees.

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The job cuts come because the apparel retailer struggles to return to profitability while sales sag. The layoffs are expected to lead to annualized savings of $300 million, Gap’s interim CEO, Bob Martin, said in a press release. Gap expects to see half of those savings in 2023, and expects to finish the layoffs by the tip of July, in line with a securities filing.

“We’re taking the crucial actions to reshape Gap Inc. for the longer term — simplifying and optimizing our operating model, elevating creativity, and driving higher delivery in every dimension of the client experience,” Martin said within the statement. 

“These changes include the consistent brand leadership structures we announced last month geared toward flattening the organizational structure to enhance the standard and speed of decision-making, while in turn reducing overhead expense,” he added.

The layoffs will “release untapped potential” across Gap’s brands – its namesake line, Old Navy, Banana Republic and Athleta, Martin said. 

“This implies saying goodbye to friends and team members we care about, and I represent the collective voice of the corporate in expressing a sincere appreciation to each worker for the dedication, energy, and heart they’ve given to Gap Inc.,” Martin said. 

Gap shares rose by about half a percentage point on Thursday. Gap’s stock has fallen about 16% this yr. Shares are hovering above $9, giving the corporate a market cap of about $3.5 billion. 

The layoffs will cost Gap about $100 million to $120 million in aggregate pretax costs, in line with a securities filing. The corporate is anticipated to spend $75 million to $85 million in employee-related costs and $25 million to $35 million on consulting and other associated costs, the filing states.

As of late January, Gap employed about 95,000 staff members, 81% of whom work in retail locations, in line with securities filings. About 9% of its global staff work in headquarters locations. 

The retailer has been grappling with a string of losses, inventory woes and the absence of a everlasting CEO. 

Within the three months that ended Jan. 28, Gap posted $4.24 billion in sales — a 6% decrease from the prior-year period — and a net lack of $273 million, or 75 cents a share. It reported annual net losses in each 2020 and 2022. 

In a memo sent to employees last week announcing the cuts, Martin said the layoffs are planned in three waves. Employees laid off from the international sourcing division were notified on April 18 and April 19, and staff in headquarters and upper field roles might be informed Thursday and Friday. Staff who might be cut from the finance division might be notified the last week of May.

“On the dates outlined above, we support distant work and recommend reducing or eliminating meetings to create space for teams. Each senior leader will follow-up with their organizations when their notifications are complete,” Martin wrote within the memo.

“My commitment and my ask of all of you is that we move through this difficult but crucial process, treating one another with respect and compassion,” he added.

During an earnings call in March, Martin said the corporate planned to diminish management layers. But he didn’t say on the time what number of positions could be cut. 

He noted in the course of the call that the apparel retailer’s staff has been “dampened by a sophisticated organizational structure, bureaucracy, and outdated processes” which have held the corporate back. 

The brand new operating and leadership structure the corporate laid out last month hopes to deal with those concerns by decreasing “layers to remove bottlenecks and make higher, faster decisions,” Martin said within the memo last week.