gap The company said on Thursday it would lay off about 1,800 workers, more than triple the 500 it announced in September, as part of a broader effort to cut costs and streamline operations.
The layoffs will affect positions at Gap’s headquarters locations as well as top positions, or employees, such as regional store leaders who hold leadership titles outside of the headquarters office, the company said. CNBC reported Tuesday that the company will lay off more than 500 workers.
Related investment news
The layoffs come as the apparel retailer struggles to return to profitability amid slumping sales. Gap interim CEO Bob Martin said in a statement that the layoffs are expected to save $300 million a year. According to a securities filing, Gap expects to cut expenses in half in 2023 and expects to complete the layoffs by the end of July.
“We are taking the necessary actions to reshape Gap Inc. for the future – simplifying and optimizing our operating model, enhancing creativity and driving better delivery in every aspect of the customer experience,” Martin said in the statement.
“These changes include a consistent brand leadership structure we announced last month, aimed at flattening the organizational structure to improve decision-making quality and speed, while reducing overhead,” he added.
Martin said the layoffs will “unlock the untapped potential” of Gap’s brands — its namesake Old Navy, Banana Republic and Athleta.
“This means saying goodbye to the friends and team members we care about, and on behalf of the company collectively, I would like to extend my heartfelt thanks to each and every employee for their dedication, energy and love for Gap Inc.,” Martin said.
Gap shares rose about half a percent on Thursday. Gap shares are down about 16% this year. Shares hover above $9, giving the company a market capitalization of about $3.5 billion.
The layoffs will cost Gap about $100 million to $120 million in total pre-tax costs, according to a securities filing. The filing said the company expects to spend $75 million to $85 million on staff-related expenses and $25 million to $35 million on consulting and other related expenses.
As of late January, Gap employed about 95,000 people, 81% of whom worked in retail stores, according to securities filings. About 9% of the global workforce works at the headquarters.
The retailer has been grappling with a string of losses, inventory issues and the absence of a permanent chief executive.
In the three months ended Jan. 28, Gap posted sales of $4.24 billion, down 6% from a year earlier, and a net loss of $273 million, or 75 cents a share. It reported annual net losses for 2020 and 2022.
In a memo announcing the layoffs sent to employees last week, Martin said the layoffs were planned in three waves. Employees in international procurement were notified of the layoffs on April 18 and April 19, and those in headquarters and senior positions will be notified on Thursday and Friday. Employees who will be made redundant from finance will be notified in the last week of May.
“On the above dates, we support remote work and recommend that meetings be reduced or canceled to make room for teams,” Martin wrote in the memo. “Each senior leader will follow up with their organization when notifications are complete.”
“My promise and my request to all of you is that we will treat each other with respect and compassion through this difficult but necessary process,” he added.
On an earnings call in March, Martin said the company plans to reduce layers of management. But he did not say at the time how many jobs would be eliminated.
He noted on the call that the apparel retailer’s employees were “frustrated by complex organizational structures, bureaucracy and outdated processes” that were holding back the company’s growth.
The new operating and leadership structure the company laid out last month hopes to address those issues by reducing “layers to remove bottlenecks and make better, faster decisions,” Martin said in a memo last week.