A clearance sale sign is seen at the Gap retail store on September 20, 2022 in Los Angeles, California.
Allison Dinner | Getty Images
Gap is laying off more than 500 employees in an attempt to cut costs and become more efficient, as the company tries to move back to profitability, CNBC has learned.
The exact number of layoffs is unclear, but the head count reduction will be larger than the 500 or so cuts to corporate positions the company announced in September, a person familiar with the matter said Tuesday.
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“Our goal is to flatten the organization, increase spans of control to create more robust roles and individual empowerment, and decrease layers to remove bottlenecks and make better, faster decisions,” Bob Martin, Gap’s chairman and interim CEO, told employees in a memo last week.
Gap shares dropped about 6% on Tuesday. The stock has fallen more than 16% this year.
The cuts come after Martin told investors during a March earnings call that the apparel retailer’s staff has been “dampened by a complicated organizational structure, bureaucracy, and outdated processes.”
He noted Gap is planning to decrease management layers to “improve the quality and speed of decision-making.” The changes will result in $300 million in savings, the first half of which will come in fiscal 2023, according to Martin.
At the time, the company didn’t disclose the total number of positions that would be cut as part of the overall restructuring but did note it was eliminating its chief growth officer position, previously held by Asheesh Saksena.
Athleta’s CEO, Mary Beth Laughton, has also left the company. Chief People Officer Sheila Peters plans to exit her role at the end of the year.
“Each of our brands now have consistent leadership structures focused on delivering excellence for our customers by elevating design and brand creative, focusing on merchandising end to end, and providing better oversight to the customer experience across all markets and channels,” Martin said on the call in March.
Impacted employees in Gap’s international sourcing division were notified about the latest cuts on April 18, while those at its San Francisco headquarters will be notified this week, the person said.
Members of the finance team who will be laid off will be told in late May, the person said.
The apparel retailer — which includes its namesake brand, Old Navy, Banana Republic and Athleta — has had a rough year as it struggled with a drop in sales, bloated inventory levels and a search for a permanent CEO.
In the three months that ended Jan. 28, Gap posted $4.24 billion in sales, but reported a net loss of $273 million, or 75 cents a share.
It managed to turn an annual net profit in 2021, but reported net losses in both 2020 and 2022.
As of Jan. 28, Gap employed about 95,000 staff members, 81% of which work in retail locations.