Despite efforts to reinvigorate its Gap, Old Navy and Banana Republic offerings, Gap is laying off 500 corporate workers as consumers snub the once-popular brands.
When you’re out, you’re out. Just ask Abercrombie & Fitch (ANF) – Get Abercrombie & Fitch Company Report or Victoria’s Secret (VSCO) – Get Victorias Secret & Co. Report what happens when consumer sentiment abruptly shifts somewhere else.
Despite efforts to reinvigorate its brands of clothing and accessories — Gap, of course, as well as higher-end Banana Republic, discount-oriented Old Navy and athleisure-focused Athleta — Gap this week announced it is laying off 500 corporate workers and moving to cut costs amid slumping sales and profits.
The jobs are mainly at Gap’s main offices in San Francisco and New York, as well as in Asia, people with the matter told the Wall Street Journal. The company is laying off staff and eliminating positions that are currently open across a range of departments. Some employees have been notified of the layoffs in recent days.
The job cuts come as Gap continues to struggle to lure consumers to what at one time was an enviable balance of low-, medium-, and high-end offerings that included everything from Old Navy-branded $10 jeans and $5 sunglasses to “BR Heritage” branded $500-plus sweaters.
They also come as retailers face a myriad of post-pandemic struggles: fierce competition from fast-fashion clothing lines like H&M, Zara, and Shein, still-low mall foot traffic, rising labor and other costs, challenging logistics and, most importantly, fickle consumers inclined to switch styles and brands on a dime based on the latest trends on Tik-Tok.
Even Old Navy Sales Are Slumping
“We’ve let our operating costs increase at a faster rate than our sales, and in turn our profitability,” Bob Martin, Gap’s executive chairman and interim CEO, wrote in a memo to employees on Tuesday informing them of the job cuts, according to a copy reviewed by the Journal.
Gap’s struggles aren’t new: The company has endured years of slumping sales at the flagship Gap brand and, more recently, problems at the Old Navy chain, which accounts for more than half of total revenue.
The pandemic and closure of hundreds of physical stores, many in shopping malls, as well as excess inventory of clothing that consumers — particularly younger ones — snubbed in favor of other brands has added to Gap’s pain over the past two-plus years.
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Sales at Old Navy took a hit this year after an attempt to make inclusive clothing sizes backfired, leaving it with surplus goods. The company is searching for a permanent CEO after the resignation of Sonia Syngal in July.
Last week, the company said it was ending a partnership with Kanye West to make clothes under the Yeezy Gap label, after West accused the company of breaching the 10-year agreement.
Other Retailers Are Also Cutting Costs, and Jobs
The Gap job cuts follow recent corporate layoffs at other retailers, including Walmart (WMT) – Get Walmart Inc. Report, Abercrombie & Fitch and Stitch Fix (SFIX) – Get Stitch Fix Inc. Report. In addition, Bed Bath & Beyond (BBBY) – Get Bed Bath & Beyond Inc. Report has said it plans to shrink its corporate ranks amid a deep sales slump.
Founded in San Francisco as a men’s clothing store selling Levi’s jeans and vinyl records in 1969, Gap had about 8,700 employees in headquarters locations as of Jan. 29, according to its most recent annual report. In total, the company had 97,000 employees, most of whom were hourly workers in its stores.
The Gap Stores, Inc. went public in 1976 with an initial offering of 1.2 million shares at $18 a share. The company’s stock fluttered around the $45-$50 range in the early 2000s at the height of its popularity.
At last check, Gap stock was at $9.29. Its shares are down about 60% over the past year through Monday’s close.