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Gap Sales Drop Amid Pandemic, Retailer To Furlough 80,000 Workers In US And Canada

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Gap Sales Drop Amid Pandemic, Retailer To Furlough 80,000 Workers In US And Canada

Gap Inc. (NYSE: GPS) will furlough 80,000 employees at its stores, which remain closed as the coronavirus pandemic rampages across the United States.

What Happened

The retailer has had to close 90% of its stores around the world due to the coronavirus pandemic and recognizes that reopening them would be “further off” than hoped.

In a message released on its corporate blog, Sonia Syngal, CEO of Gap Inc. and Bob Fisher, Chair of Gap Inc.’s Board of Directors, announced they had made the “painful decision” to furlough the majority of their store teams in the United States and Canada.

Pay for the 80,000 affected employees will be paused, but benefits will continue until the stores reopen. The company has continued paying employees over the past two weeks.

The executives also said that they would make “difficult but necessary” reductions at Gap Inc.’s offices and headquarters over the coming weeks to “more adequately reflect the needs of the current state” of their business. 

Syngal and the Executive Chair Bobby Martin, the entire board, as well as the leadership team, will also take pay cuts.

Why It Matters

The decision comes after Syngal took charge on March 23 as the company’s new CEO. She had previously served as CEO of Old Navy, Gap's clothing and accessories division. She has been with the company since 2004.

Even though Gap Inc. generates 20% of its sales online, which amount to more than $3 billion, the pandemic has hit the company hard as people shift to buying daily necessities instead of clothing during the current period, reported Fortune. 

The company reported quarterly sales of $4.674 billion in its Q4 results beating analyst consensus of $4.55 billion by 2.73%. Quarterly earnings per share stood at 58 cents, exceeding analyst estimates of 41 cents by 41.46%.

Retail rival Macy’s Inc. (NYSE: M) has already sent most of its employees on furlough from this week. The company’s stock was one of the worst-performing in the entire S&P500 last year and has not done well in 2020 either due to COVID-19.

Price Action

Gap Inc. shares traded 2.56% lower at $7.23 in the after-hours session on Monday. The shares had closed the regular session 4.75% lower at $7.42.

Photo Credit: Michael Rivera via Wikimedia.

 

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