Gap will cut about 1,800 employees, greater than 3 times the five hundred layoffs it announced in September, as a part of a sweeping effort to cut costs and streamline operations, the corporate said on Thursday.
The layoffs will affect positions at Gap headquarters locations together with senior field positions or employees corresponding to regional store leaders who hold management titles outside of the pinnacle office, the corporate said. CNBC reported on Tuesday that the corporate would lay off greater than 500 employees.
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Job cuts come as a clothing retailer struggles to return to profitability while sales decline. The layoffs are expected to generate annual savings of $300 million, Gap interim CEO Bob Martin said in a press release. The Gap expects half of those savings in 2023 and expects the layoffs to be accomplished by the top of July, according to a securities note.
“We’re taking the needed steps to transform Gap Inc. for the long run – by simplifying and optimizing our operating model, increasing creativity and providing a greater customer experience in every dimension,” Martin said in a press release.
“These changes include the cohesive brand leadership structures we announced last month, geared toward flattening the organizational structure to improve the standard and speed of decision-making while reducing overhead,” he added.
Martin said the layoffs would “unleash untapped potential” across all Gap brands – the lines of the identical name, Old Navy, Banana Republic and Athleta.
“It means saying goodbye to friends and team members we care about, and I represent the collective voice of the corporate by expressing sincere appreciation to each worker for the dedication, energy and heart they’ve given to Gap Inc,” said Martin.
Gap shares rose about half a percentage point on Thursday. Gap shares have fallen about 16% this yr. The stock trades above $9, giving the corporate a market capitalization of roughly $3.5 billion.
The layoffs will cost the Gap roughly $100 million to $120 million in total pre-tax costs, according to the securities document. The corporate is anticipated to spend between $75 million and $85 million on worker costs and $25 million to $35 million in consulting and other related costs, the filing states.
At the top of January, Gap had about 95,000 employees, 81% of whom work in retail stores, according to securities filings. About 9% of worldwide personnel work at headquarters.
The retailer is battling a series of losses, inventory issues and the dearth of a everlasting CEO.
Within the three months ending Jan. 28, Gap posted $4.24 billion in sales – a 6% decline from the prior-year period – and a net lack of $273 million, or 75 cents a share. It reported annual net losses in each 2020 and 2022.
In a memo sent to workers last week announcing the cuts, Martin said layoffs were planned in three waves. Employees laid off from the international purchasing department were notified on April 18 and 19, and staff at headquarters and senior positions can be notified on Thursday and Friday. Staff to be faraway from the finance department can be notified within the last week of May.
“Through the dates set out above, we support distant working and recommend limiting or eliminating meetings to create space for teams. Each senior leader will contact their organizations once their notifications are complete,” Martin wrote within the memo.
“My commitment and request to all of you is that we undergo this difficult but needed process by treating one another with respect and compassion,” he added.
During a salary call in March, Martin said the corporate plans to reduce the variety of management layers. But he didn’t say on the time what number of jobs could be removed.
He noted in the course of the call that the apparel retailer’s staff had been “weakened by the complicated organizational structure, bureaucracy and outdated processes” that held the corporate back.
The brand new operational and leadership structure the corporate developed last month goals to address these issues by reducing “layers to remove bottlenecks and make higher, faster decisions,” Martin said in a memo last week.