gap will lay off about 1,800 employees, more than triple the 500 layoffs announced in September, as part of a broader effort to cut costs and streamline operations, the company said Thursday.
The layoffs will impact positions at Gap’s headquarters, as well as upper-field positions or workers such as regional store managers who hold managerial titles outside of a headquarters, the company said. CNBC reported Tuesday that the company would lay off more than 500 employees.
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The job cuts come as the apparel retailer struggles to return to profitability while sales plummet. The layoffs are expected to result in annual savings of $300 million, Gap’s interim CEO Bob Martin said in a statement. According to a securities filing, Gap expects half of those savings in 2023 and expects to complete the layoffs by the end of July.
“We are taking the necessary actions to reshape Gap Inc. for the future – by simplifying and streamlining our operating model, increasing creativity and driving better delivery at every dimension of the customer experience,” Martin said in the statement.
“Among those changes are the consistent brand governance structures we announced last month to flatten the organizational structure to improve the quality and speed of decision-making while reducing overhead,” he added.
The layoffs will “unlock untapped potential” for Gap’s brands — the eponymous 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 by expressing to each employee a sincere appreciation for the dedication, energy and heart they brought to Gap Inc have,” said Martin.
Gap shares rose about half a percentage point on Thursday. Gap’s stock is down about 16% this year. Shares are hovering above $9, giving the company a market cap of around $3.5 billion.
According to a securities filing, the layoffs will cost Gap about $100 million to $120 million in total pre-tax costs. The company is expected to spend $75 million to $85 million in employee-related costs and $25 million to $35 million in consulting and other related costs, the filings say.
At the end of January, Gap employed about 95,000 people, 81% of whom work in retail stores, according to securities filings. Approximately 9% of global employees work at headquarters locations.
The retailer has struggled with a series of losses, inventory issues and the lack of a permanent CEO.
For the three months ended Jan. 28, Gap reported revenue of $4.24 billion — down 6% from the year-ago 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 staff last week announcing the cuts, Martin said the layoffs were planned in three waves. International procurement staff who were laid off were notified on April 18 and 19, and staff in headquarters and senior field functions will be notified on Thursday and Friday. Employees who are fired from the finance department will be notified in the last week of May.
“On the dates above, we support remote work and recommend reducing or eliminating meetings to make room for teams.
“My commitment and request to all of you is that we go through this difficult but necessary process and treat one another with respect and compassion,” he added.
During an earnings call in March, Martin said the company plans to cut management tiers. At the time, however, he did not say how many jobs would be cut.
He noted during the call that the clothing retailer’s employees were “steamed by a complicated organizational structure, bureaucracy and outdated processes” that have held the company back.
The new operating and governance structure the company designed last month hopes to address those concerns by “decreasing tiers to remove bottlenecks and make better, faster decisions,” Martin said in the memo last week.
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