Gap to lay off 1,800 workers as part of broad push to cut costs
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Gap will lay off about 1,800 employees, more than three times as many as the 500 layoffs it announced in September, as part of a broad effort to cut costs and streamline operations, the company said Thursday.
The layoffs will affect roles at Gap's headquarters locations along with upper field positions, or workers such as regional store leaders who hold leadership titles outside of a headquarters office, the company said. CNBC reported Tuesday that the company would lay off more than 500 employees.
The job cuts come as the apparel retailer struggles to return to profitability while sales sag. The layoffs are expected to result in annualized savings of $300 million, Gap's interim CEO, Bob Martin, said in a statement. Gap expects to see half of those savings in 2023, and expects to complete the layoffs by the end of July, according to a securities filing.
"We are taking the necessary actions to reshape Gap Inc. for the future — simplifying and optimizing our operating model, elevating creativity, and driving better delivery in every dimension of the customer experience," Martin said in the statement.
"These changes include the consistent brand leadership structures we announced last month aimed at flattening the organizational structure to improve the quality 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 means saying goodbye to friends and team members we care about, and I represent the collective voice of the company in expressing a sincere appreciation to every employee for the dedication, energy, and heart they have 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 year. Shares are hovering above $9, giving the company a market cap of about $3.5 billion.
The layoffs will cost Gap about $100 million to $120 million in aggregate pretax costs, according to a securities filing. The company is expected 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, according to 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 permanent CEO.
In 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 loss of $273 million, or 75 cents a share. It reported annual net losses in both 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 will be informed Thursday and Friday. Staff who will be cut from the finance division will be notified the last week of May.
"On the dates outlined above, we support remote 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 in the memo.
"My commitment and my ask of all of you is that we move through this difficult but necessary process, treating each other with respect and compassion," he added.
During an earnings call in March, Martin said the company planned to decrease management layers. But he did not say at the time how many positions would be cut.
He noted during the call that the apparel retailer's staff has been "dampened by a complicated organizational structure, bureaucracy, and outdated processes" that have held the company back.
The new operating and leadership structure the company laid out last month hopes to address those concerns by decreasing "layers to remove bottlenecks and make better, faster decisions," Martin said in the memo last week.
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