Gap announced Thursday that it will be laying off 1,800 workers, which is more than triple the number of 500 laid-off employees in September. This move comes as part a broader effort to reduce costs and streamline its operations.
The company stated that the layoffs would affect positions at Gap headquarters, as well as upper field positions or workers, such regional store leaders, who hold leadership titles but are not located in a headquarters. CNBC reported on Tuesday that Gap would be laying off more than 500 workers.
As sales slump, the clothing retailer is struggling to get back to profitability. Bob Martin, interim CEO of Gap, stated in a press release that the layoffs will result in an annualized saving of $300 million. Gap is expecting to save half that amount in 2023 and to finish the layoffs before the end of the month, according to an SEC filing.
Martin stated in a statement that "We will take the necessary steps to reshape Gap Inc. in order to better serve our customers in all dimensions of their experience."
He added that "these changes include the consistent leadership structures for brands we announced last week, aimed at flattening organizational structure in order to improve quality and speed decision-making while reducing overhead expenses."
Martin said that the layoffs would "release untapped potentail" for Gap brands, including its own line, Old Navy and Banana Republic, as well as Athleta.
Martin said, "This means goodbye to friends and teammates we care about. I speak for the company when I express our sincere gratitude to each employee for their dedication, energy and heart that they have given Gap Inc.
Gap's shares increased by about a half-point on Thursday. Gap stock is down about 16% so far this year. The company's market capitalization is about $3.5 billion, with shares hovering around $9.
According to a filing with the Securities and Exchange Commission, Gap will incur pre-tax costs of between $100 million and $120 million as a result of layoffs. According to the filing, Gap is expected to spend between $75 and $85 million on employee-related expenses and between $25 and $35 million for consulting and related costs.
According to filings with the Securities and Exchange Commission, Gap had about 95,000 employees as of late January. 81% worked in retail stores. Around 9% of the global staff are based in its headquarters.
The retailer is struggling with inventory problems, a string losses and the lack of a permanent chief executive officer.
Gap reported $4.24 billion of sales in the three-month period ending Jan. 28 -- a 6 percent decrease from the previous year's period -- with a net loss, or 75 cents per share, of $273. Both 2020 and 2022, it reported net losses.
Martin announced the cuts in a memo to employees sent last week. He said that the layoffs would be done in three waves. The international sourcing division laid off employees were informed on April 18-19, and the staff at headquarters and in upper field roles received notification on Thursday and Friday. The last week in May, staff who will be laid off from the finance department will be informed.
"We support remote working on the dates above and recommend that meetings be reduced or eliminated to allow teams more space. Martin wrote that each senior leader would follow up with their organization once their notifications were complete.
He added, "I ask that you all treat each other with compassion and respect as we go through this difficult process."
Martin stated that the company would be reducing management layers during a call with investors in March. He did not specify how many jobs would be eliminated at the time.
He said that during the conference call, the staff of the apparel retailer has been "dampened" by a complex organizational structure, outdated processes, and bureaucracy.
Martin stated in a memo sent last week that the new structure of the company's operating and leadership will address these concerns by reducing "layers" to eliminate bottlenecks and to make faster, better decisions.