Clothing retailer Gap is laying off roughly 500 corporate employees in order to cut costs due to falling sales and profitability.
The jobs are mostly at Gap’s headquarters in San Francisco and New York, as well as in Asia, people aware of the matter said.
The firm is reducing its workforce and removing open positions in a variety of departments.
In a memo to employees seen by the Wall Street Journal, interim CEO Bob Martin informed employees about the job cuts.
Martin said: “We’ve let our operating costs increase at a faster rate than our sales, and in turn our profitability.”
The firm has battled years of declining sales at its flagship Gap brand and, more recently, challenges at the Old Navy chain, which makes up more than half of overall revenue.
Old Navy’s sales fell this year after a move to produce inclusive clothing sizes flopped, leaving the company with excess inventory.
Following Sonia Syngal’s departure in July, the firm is looking for a new CEO.
Last week, the firm announced the termination of a 10-year collaboration with Kanye West to produce clothing under the Yeezy Gap label after Mr. West accused the company of violating the contract.
The job losses had nothing to do with the dissolution of the Yeezy Gap relationship.
Gap intends to launch Yeezy Gap items that it has in the pipeline, which suggests the label will not be phased out entirely, familiar sources said.
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Gap finance chief Katrina O’Connell told investors in August that the business will explore measures to cut costs and overhead, including a halt on planned hires.
Its annual report shows that as of January 29, Gap employed around 8,700 workers at headquarters locations.
The company had 97,000 staffers in total, the majority of whom worked on an hourly basis in its stores.
The Gap redundancies come on the heels of corporate layoffs at other retailers such as Walmart, Abercrombie & Fitch, and Stitch Fix.
Moreover, in the midst of a severe sales slump, Bed Bath & Beyond has announced plans to reduce its corporate staff.
Retail sales have dropped from last year’s blistering pace, as consumers spend less on clothing and household products and more on vacation and dining out.
Groceries, gas, and other commodities are becoming more costly as a result of inflation, leaving less room in budgets for non-essential items.
As a result, many retailers’ stocks have piled up, lowering profitability as they offer discounts to move away the products.
Source: The Wall Street Journal