Roughly 500 corporate jobs are being eliminated at the Gap, adding to the problems that the beleaguered retailer is currently facing.
The cuts include a mix of layoffs and open roles being axed at the company's corporate offices in New York, San Francisco and across Asia, according to a person familiar with the situation. The Wall Street Journal, which first reported the news, said the layoffs started in recent days and amount to roughly 5% of the Gap's 8,700 corporate employees.
News of the layoffs comes a few months after the Gap reported weak first quarter earnings, with sales sliding at its flagship brand and its more popular Old Navy chain. In July, the company announced that CEO Sonia Syngal would step down after less than three years. She will be replaced by an interim CEO while the company searches for a permanent leader.
Neil Saunders, managing director at GlobalData, wrote in an analyst note that the job cuts "make sense" because of the company's slowing sales and shrinking retail footprint. He added that Old Navy is no longer as strong as it had been in boosting the Gap's bottom line.
"Traditionally, Gap could rely on its Old Navy banner to cover some of the sluggishness in other parts of the business. However, with the division suffering from supply chain issues and softening demand from the family segment, the whole company is very exposed and needs to take tougher actions to appease investors and present better numbers over the second half of the year," Saunders wrote.
Last week, Kanye West announced he was terminating his two-year-old partnership with the Gap because of "substantial noncompliance." He alleged the retailer breached their partnership by not opening branded Yeezy stores and distributing his apparel as originally planned, among other issues.
Gap (GPS) confirmed that it was winding down the partnership in an internal company email that was seen by CNN Business.
Shares of the Gap slipped nearly 3% in Tuesday trading, with the stock down 50% for the year.
Source: CNN
