Gap Inc. Announces Major Workforce Reduction in Latest Restructuring Effort: What's Next for the Apparel Retailer?

Highlights

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• In a significant restructuring effort, Gap Inc. is set to cut hundreds of jobs from its workforce across various divisions and regions.
• The scale of these job cuts is expected to be larger than the previous round in September 2020.
• The company's goal is to streamline its operations and reduce management layers, which it hopes will generate cost savings of around $250 million per year.
• Gap has struggled with declining sales and profitability in recent years due to changing consumer preferences and increased competition.

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Gap Inc., one of the largest apparel retailers in the world, is planning to eliminate hundreds of jobs from its global workforce, according to multiple reports. The company is undergoing a major restructuring effort to improve its performance and profitability amid a challenging retail environment.

The current round of layoffs is expected to be larger than the previous one in September 2020, when Gap cut about 500 corporate positions across its brands and functions. The company said at the time that it aimed to save about $250 million annually by streamlining its operations and reducing management layers.

The latest job cuts will affect employees in different divisions and regions, starting with the international sourcing team this month, followed by roles across brands at the San Francisco headquarters this week, and finally finance positions in May, according to an internal memo reviewed by Bloomberg.

Gap declined to comment on the specifics of the layoffs, but said in a statement that it is "committed to driving long-term profitable growth for our shareholders and positioning our brands for a strong future."

Gap has been struggling to revive its sales and profitability for several years, as it faced increased competition from online and fast-fashion rivals, changing consumer preferences, and the impact of the Covid-19 pandemic. The company reported a net loss of $665 million for fiscal year 2020, compared to a net income of $351 million in 2019. Comparable sales declined 16% across its four main brands: Gap, Old Navy, Banana Republic, and Athleta.

The company has also been without a permanent CEO since Sonia Syngal was ousted in July 2020, after less than five months on the job. Bob Martin, a board member and former CEO of Walmart International, has been serving as interim CEO since then. The company has not announced a timeline for naming a new leader.

Gap is not the only retailer that has resorted to layoffs amid the pandemic-induced downturn. Many other companies, such as Macy's, Kohl's, J.C. Penney, Nordstrom, and Neiman Marcus, have also cut jobs or filed for bankruptcy protection in the past year.

However, some analysts believe that Gap still has potential to turn around its fortunes, especially with its fast-growing Athleta brand and its partnership with Kanye West's Yeezy label. The company also plans to invest more in e-commerce and digital capabilities, as well as expand its presence in international markets such as China and India.