Gap set to lay off 500 employees to protect margins and combat sluggish sales

Gap Inc. clothing retail company based in San Francisco, California, is set to terminate a percentage of its workforce, and this was confirmed this week. The company will be laying off some 500 employees in its corporate unit as it continues to struggle amid sluggish sales.

As per Reuters, Gap will be getting rid of current open roles across its company departments. It was mentioned that job elimination mostly affects its offices in New York, San Francisco, and Asia.

The global apparel brand revealed its decision to cut job posts on Tuesday, Sept. 20. It said that there is a need to do this so it can protect margins as well as combat the slow sales of outdated clothing items, including in its Old Navy brand stores.

Gap is also currently in the middle of a management transition after its chief executive officer stepped down earlier this year. Sonia Syngal made her exit, and she was replaced by Bob Martin as interim chief. He has been serving the company as executive chairman and now temporarily leading the firm.

The clothing brand has a total of 97,000 staff as of the end of January this year. As stated in a regulatory filing, about nine percent of the workforce are stationed at the company’s headquarter locations.

In any case, CNN Business reported that the latest layoffs are an added problem that Gap is facing these days. A source who is familiar with the matter said that the job terminations have already started recently.

The report of the job cuts comes just a few months after Gap posted weak earnings in the first quarter, with sales on a decline at its flagship brand and Old Navy store chain. On top of the issues with sales, the company is also in search of a permanent leader to take over the CEO role from Martin.

GlobalData, a British data analytics and consulting company, noted that the layoffs actually make sense due to Gap’s weak sales and diminishing retail footprint. He pointed out that Old Navy is no longer a strong brand compared to the past.

“Traditionally, Gap could rely on its Old Navy banner to cover some of the sluggishness in other parts of the business,” Neil Saunders, GlobalData’s managing director, wrote in an analyst note.

“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.”