Skip to main content

Gap Inc. Job Cuts Follow Kanye Split

Gap Inc. is cutting approximately 500 corporate jobs across its New York, San Francisco and Asia offices.

A spokesperson confirmed the San Francisco owner of the Gap, Athleta, Old Navy and Banana Republic brands is both laying off staff and eliminating open positions across a range of departments, as the Wall Street Journal first reported Tuesday. Some employees have been notified of the layoffs in recent days.

The retailer first alluded to cost cuts in its Aug. 26 second-quarter earnings call, when chief financial officer Katrina O’Connell said the company would reduce overhead investments, including “a pause on planned hiring and open positions, among other actions.”

The cuts add to the layoffs sweeping across the apparel retail sector in the wake of a rocky macroeconomic climate and concerns of a potential recession. At the end of August, VF Corp. confirmed it cut approximately 300 corporate jobs and another 300 open roles, while beleaguered Bed Bath & Beyond said it was slashing its corporate and supply chain positions by 20 percent. At the same time, Tommy Hilfiger and Calvin Klein owner PVH said it would be cutting at least 10 percent of “people costs” by the end of 2023.

Even the largest retailer in the U.S. wasn’t immune to job cuts, with Walmart eliminating 200 jobs after warning that profits are likely to fall for the remainder of 2022.

Related Stories

The layoffs have stretched across digital businesses as well, with Shopify, Stitch Fix, StockX and ThredUp all having sliced payroll since June.

Although Gap Inc. had been foundering in recent years, the company attempted a turnaround in late 2020 under the leadership of CEO Sonia Syngal, who was elevated to the role in March that year. But after the Covid-19 pandemic and ensuing supply chain constraints led to a flurry of inventory delays, and millions lost in sales, Syngal stepped down from the position.

The inventory imbalance even forced Old Navy to dial down its size-inclusive Bodequality campaign due to an overabundance of smaller and bigger sizes, while middle sizes sold out too quickly. Old Navy’s sales in the second quarter dipped 13 percent to $2.1 billion, representing 54.4 percent of Gap Inc.’s total net sales.

“We’ve let our operating costs increase at a faster rate than our sales, and in turn our profitability,” Bob Martin, Gap’s executive chairman and interim CEO, wrote in a memo to employees on Tuesday informing them of the job cuts, according to a copy reviewed by the WSJ.

The financial frustrations at Gap Inc. have yet to ease, with second-quarter net sales falling 8 percent to $3.86 billion on a $49 million net loss. The combination of the CEO departure, external economic and inflationary factors and the disappointing quarterly performance led the company to withdraw its fiscal 2022 outlook.

However, outside of the company’s retail performance, Gap Inc. is burning through its cash reserves. The retailer ended the quarter with cash and cash equivalents of $708 million. Net cash from operating activities was negative $207 million, year-to-date free cash flow, defined as net cash from operating activities less purchases of property and equipment, was negative $613 million.

According to its annual report, Gap employed about 8,700 in its headquarters locations as of Jan. 29. In total, the company’s 97,000 employees largely consisted of hourly store workers.

The job cuts also come as Gap Inc. has been embroiled in a public spat with Kanye West, who said this month that he was terminating the partnership between his Yeezy brand and the legacy retailer. West, who now goes by Ye, claims that Gap failed to live up to the terms of the initial 10-year partnership agreement such as distributing Yeezy products in its stores by the latter half of 2021 and launching dedicated YZY stores.

Ye’s collaboration was expected to bring in a windfall for Gap Inc., which has long sought to revive the buzz and relevance it enjoyed in the 1990s. UBS Group estimated in March 2021 that the Yeezy x Gap partnership could be worth $970 million, and generate above $1 billion in sales as soon as 2023. The collab’s Times Square takeover draw notable crowds, signaling strong demand for the partnership’s creative outpout.

The WSJ report said Gap Inc. plans to introduce Yeezy Gap items it has in the pipeline, meaning the label won’t disappear immediately.

Gap hopes to minimize go-forward overhead spending companywide. It is reducing marketing and digital platform investments, and cutting back the number of new Old Navy stores slated for the second half of 2022. But it still remains unclear what the status is for Gap’s logistics and fulfillment services division GPS Platform Services, and whether any of the budget cuts will impact the new platform. Like competitor American Eagle Outfitters and its Quiet Platforms launch, Gap Inc. is seeking to open up its shipping, fulfillment and warehousing to companies outside its portfolio.