Gap Inc. Job Cuts Follow Kanye Split – Sourcing Journal

Gap Inc. is cutting about 500 jobs at its offices in New York, San Francisco and Asia.

A spokesman confirmed that the San Francisco owner of brands Gap, Athleta, Old Navy and Banana Republic is both laying off staff and downsizing vacancies in a number of departments, the Wall Street Journal first reported Tuesday. Some employees have been informed of the layoffs in recent days.

The retailer first alluded to cost-cutting on its second-quarter earnings call on Aug. 26, when chief financial officer Katrina O’Connell said the company would reduce overhead, including “a pause on planned hiring and open positions, among other things.”

The cuts come on top of the layoffs sweeping through the apparel retail sector amid a rocky macroeconomic climate and fears of a possible recession. In late August, VF Corp. confirmed it would cut about 300 jobs at the company and another 300 vacancies, while struggling firm Bed Bath & Beyond said it would cut its corporate and supply chain positions by 20 percent. At the same time, PVH, owners of Tommy Hilfiger and Calvin Klein, said they would cut at least 10 percent of “personnel costs” by the end of 2023.

Even the largest retailer in the US wasn’t immune to job cuts, as Walmart cut 200 jobs after warning that profits are likely to fall for the remainder of 2022.

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The layoffs have also spread to digital businesses, with Shopify, Stitch Fix, StockX, and ThredUp all showing pay cuts since June.

Though Gap Inc. had failed in recent years, the company attempted a turnaround in late 2020 under the leadership of CEO Sonia Syngal, who was promoted to the role in March of this year. But after the Covid-19 pandemic and resulting supply chain restrictions caused a spate of inventory delays and millions of dollars in lost sales, Syngal resigned from his position.

The inventory imbalance even forced Old Navy to end its size-inclusive Bodequality campaign due to oversupply of both smaller and larger sizes while medium sizes sold out too quickly. Old Navy revenue fell 13 percent to $2.1 billion in the second quarter, accounting for 54.4 percent of Gap Inc.’s total net revenue.

“We’ve allowed our operating expenses to grow faster than our sales, and therefore our profitability,” Bob Martin, Gap’s chairman and interim CEO, wrote in a memo to employees on Tuesday informing them of the job cuts on a statement released by the WSJ checked copy.

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Financial frustrations at Gap Inc. have yet to abate, with second-quarter net sales falling 8 percent to $3.86 billion on a $49 million net loss. The combination of the CEO’s departure, external economic and inflation factors, and disappointing quarterly performance prompted the company to withdraw its guidance for fiscal 2022.

Aside from the company’s retail performance, however, Gap Inc. is burning through its cash reserves. The retailer ended the quarter with $708 million in cash and cash equivalents. Net income from operations was minus $207 million and year-to-date free cash flow, defined as net income from operations less acquisitions of property, plant and equipment, was minus $613 million.

According to its annual report, as of January 29, Gap employed about 8,700 people at its main sites. Collectively, the company’s 97,000 employees were made up largely of hourly shop workers.

The job cuts also come as Gap Inc. was embroiled in a public row with Kanye West, who said this month that he was ending the partnership between his Yeezy brand and the old retailer. West, now known as Ye, claims that Gap failed to meet the terms of the original 10-year partnership agreement, such as distributing Yeezy products in its stores through the second half of 2021 and opening dedicated YZY stores. Businesses.

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Yes’s collaboration should bring a godsend to Gap Inc., which has long sought to rekindle the enthusiasm and relevance it had in the 1990s. In March 2021, UBS Group estimated that the Yeezy x Gap partnership was worth US$970 million and could generate over US$1 billion in revenue as early as 2023.

According to the WSJ report, Gap Inc. plans to launch Yeezy Gap items it has in the pipeline, meaning the label won’t go away immediately.

Gap hopes to minimize overhead spend across the company. It reduces investments in marketing and digital platforms and reduces the number of new Old Navy stores planned for the second half of 2022. However, it remains unclear what the status of Gap’s logistics and fulfillment services division GPS Platform Services is, and whether any of the budget cuts will impact the new platform. Like competitor American Eagle Outfitters and its launch of Quiet Platforms, Gap Inc. is looking to open up its shipping, fulfillment and warehousing to companies outside of its portfolio.

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