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Gap is cutting 500 corporate jobs as it searches for a CEO and answers
Gap Inc. is cutting 500 corporate jobs as it continues to search for a permanent CEO and it seeks to come up with answers to buoy its top and bottom lines following a second quarter that saw it report a 10 percent decline in comp sales and a net loss of $49 million.
The apparel retailer is eliminating jobs that are currently open and laying off staff primarily in its offices in New York and San Francisco, according to The Wall Street Journal, which first reported the news.
The Journal reviewed an internal memo sent yesterday to employees from Bob Martin, Gap’s executive chairman and interim CEO. Mr. Martin, who has decades of retail experience including serving as CEO of Walmart’s international business, stepped into the interim CEO role in July following Sonia Syngal’s departure from the company.
“We’ve let our operating costs increase at a faster rate than our sales, and in turn our profitability,” he wrote.
The problems facing the Gap banner have been ongoing for years forcing the chain to close stores and shift its real estate strategy from operating in malls to seeking standalone locations.
The chain’s Old Navy business, which for years had been relied on for consistent growth, has seen its business go in the wrong direction with much of its troubles attributed to fashion miscues and lost share to discounters and off-pricers. Old Navy has also taken hits from COVID-19-related factory closures and more recently the slow down in discretionary spending by Americans trying to navigate through a period of high inflation.
Last week Gap announced that it was winding down its business venture with Kanye West under the Yeezy Gap brand label. Mr. West accused the retailer of failing to live up to the terms of the agreement including releasing new apparel and opening retail stores, according to a separate Journal report. Items currently in the pipeline will continue with new merchandise priced below $100 expected in Gap stores.
A CNBC article in July posited that Gap needed to accomplish three things to get its business on track. These included finding a new CEO, putting Old Navy’s business back on track and prove out its relationship with Mr. West with solid business results. So far, the retail apparel chain operator has gone zero for three.
The company last week pulled its financial guidance for the year, CNBC reports in another article, citing macroeconomic conditions and executional challenges.
- Gap Inc. Reports Second Quarter Fiscal 2022 Results – Gap Inc.
- Gap Is Cutting 500 Corporate Jobs – The Wall Street Journal
- Where does Gap go next as CEO Sonia Syngal departs? – RetailWire
- Gap eliminating about 500 corporate jobs as sales fall – CNBC
- 3 things Gap needs to fix to turn its struggling business around – CNBC
- Are Old Navy’s issues more about demand than supply? – RetailWire
- Gap and Kanye West Are Ending Their Partnership – The Wall Street Journal
Discussion Questions
DISCUSSION QUESTIONS: What do you see as Gap Inc.’s current strengths and weaknesses? What does it need to build on the first and eliminate the second?
Poll
Loading …BrainTrust
Liza Amlani
Principal and Founder, Retail Strategy Group
Phil Rubin
Founder, Grey Space Matters
Gap is a company in trouble. It made a big loss in the first half of the fiscal year. Old Navy isn’t working, and the Gap banner continues to shrink. Its strategy with Kanye has gone south and it has no real sense of how to reinvigorate a brand that has been tired for many years. On top of all of this it has no permanent CEO. Against this backdrop it is hardly surprising that it is making cuts. The problem is that you can’t cut your way to prosperity. A strategy for growth is needed and, on this front, Gap has very few answers.
500 cuts? It seems to me that the cutting is way too late or the remaining team will be deluged with work.
Gap has fallen into the silver bullet syndrome. They are at the point that they are thinking that a little of this, a little of that will turn the corner for them. But the corner is too far away. It is time to start writing the obituaries.
This story is not so much about job cuts as it is about the implosion of a brand. The YZY deal was a Hail Mary event that went south — big time. And now there’s no place to hide. No visible new strategy to pull out of the tail spin. There were celebrity partners that could have worked. Signing up a megalomaniac known to sow chaos was ill conceived.
Layoffs are not the answer. It’s a short-term solution to a problem that is rooted in Gap’s go-to-market strategy. Gap Inc. needs to better understand how their customer has evolved and what is important to them. Leveraging insights will drive better product decisions and will translate to how and where they engage with their customer.
Rethinking the operating model and building product-focused teams that put consumers first will drive the right merchandising strategy across all Gap Inc. banners.
Gap. What a modern day cluster, eh? Did you see the three designers Target just partnered with? Great brand matches all. But what did Gap do? Partnered with one of the most explosive personalities in pop culture. Really? And the line up of CEOs, mostly financial people and no merchants. Really? They say it’s always darkest before the dawn, so perhaps Gap is on the verge of turning it around, but so far there is no indication of that whatsoever.
The death watch is on. It has been a long time coming, and Old Navy was saving the day. Now it isn’t any longer.
The Yeezy partnership was bizarre from the jump. So off-brand for Gap. In fact, that seems to be a big part of Gap Brands’ problem. I don’t think it remotely knows what it stands for anymore. How do you go from big logo casual Friday to Yeezy?
It’s only a matter of time now, I sure wouldn’t take the CEO job there. Would you?
Gap lays off 5 percent of their workforce and now people worry about them? When was their last slam dunk? Gap sheets at Walmart? Gap + Yeezy’s display of his goods in trash bags?
This brand has been searching for its soul for well over a decade. Like an old car lurching forward and stopping, nothing can mask the fact that the engine is missing. The board of directors and anyone who has been at top levels for over 10 years are more to blame than “oh, it must be a recession.”
I’d also be curious how many WFH were in this 500 person lay off. One thing is certain, there is more wrong here than one CEO, one poorly thought out influencer partnership, and one season.
As I’ve written before, retailers like Gap that have lost their way and what made them successful originally are doomed, much like Sears. Athleta is perhaps a bright spot, Old Navy is seemingly toast. With every retailer being promotional these days, cutting prices, like cutting people, isn’t going to work.
Rather than too big to fail, Gap is likely too big to succeed. And that’s why cutting won’t work. There needs to be real leadership and a market position that customers will seek out and pay for. That’s a tall order.
Gap is in choppy waters right now and the first order of business is to find a quality CEO who has demonstrated success in this type of situation before. Hiring an executive who is comfortable navigating the ship as Gap takes on water is critical. Second, lopping people from the rolls helps reduce costs, but Gap has completely lost its bearings and will be in for a tough slog ahead. If you were to conduct a quick poll on the street about what the Gap brand stands for these days, I’d bet the answers would be all over the board, and some might include blank stares.
This is pathetic. We see this happening to many retailers trying to throw solutions we have consistently seen thrown up for so many hurt companies in our markets. They must find two or three management players that will come in with strategies that will rock the country, and implement them. Then we can start the resurfacing this ship. Not before.
Gap lost its focus a long time ago. Their brand is convoluted, and they haven’t been able to attract new customers to replace those who are aging out of their target persona. Doing the same thing over and over again and expecting different results never works.
Not to pile on, but Gap has a merchandising problem first and foremost even if it has an expense problem warranting the layoffs. Let’s face it: If sales were better, its expenses as a percentage of those sales would be healthier. Sounds obvious, but driving the top line needs to be the focus of new Gap management and that is a big mountain to climb.
I think the weaknesses are painfully obvious, far more obvious in fact than any potential strengths. Simply put, Gap has to find out whether or not it can find the soul of its brands. Unless Gap and Old Navy can find a new reason for being, a 21st century brand value proposition and a unique – or near unique – consumer benefit proposition, it is probably doomed. You can’t fire your way to a consumer-centric strategy, nor is there a superhero out there waiting in the wings to swoop in and save the company. Gap succeeded because it managed to connect to the Boomer zeitgeist. Now it has to find a way to build a similar connection to Millennials and/or Gen Z. It’s past time for an “internal rebrand” – not some kind of big public marketing event, but an objective internal exercise in seeing whether or not the company still has a reason for existing.
I managed Gap stores when its founder Don Fisher was running the business and the stores were cool. This week, I visited a Gap and didn’t see a lot that was much different. The fixtures have been updated over the years, but a lot of the merchandise has not. The apparel selection was boring and the sales floor needed attention.
Regarding Yeezy, the person who okayed that deal had to know up front that he’d be a sideshow and distract from the Gap brand. They also had to know from his track record that this partnership would backfire and it did. Majestically.
Whomever takes the lead at Gap has a lot of work to do. Much of it will be reconnecting with the customers who have stayed loyal to the brand. They don’t deserve the rehashed designs the stores are stocked with. Gap is known for basics, and going back to the basics here is a good place to start.
You must’ve missed the ugly print era. No, not our signature rhinestone jungle animals — just weird prints that were sort of Amish. Then they moved on to Yeezy. I truly have no words. The problem with their basics is you can get them at Target for half the price.
I bet some of those ugly prints are still on clearance racks! I agree about Target, however Gap Basics used to be better quality. The company needs a new design team.
Even after the past five years of upheaval the Gap name still holds a lot of weight with consumers, so their place in the apparel universe is still salvageable. But closing stores cost them dearly, not just with lost capital dollars, but in lost customer engagement from no longer having a way to physically engage with the product. I’d love to see Gap adopt a fresh slate mentality and build something completely new that pulls all online and offline channels together in a smaller format that partners more directly with local community.
While I’m still cautious about Y-on-Y comparisons — did 2021 see a post Pandemic surge? — the reality of course is the GAP has had troubles for years (and without diving too deep, I believe most of us are thinking it’s actually this year’s comps that are amped up … so it’s even worse looking than it first appears).
I don’t have an answer; at one point it seemed like they just had too many stores; it also seems like they’ve had trouble adapting as more brands have moved into the “business casual” look … which was one of their core strengths. (I believe there’s a term for this: “competition.”) Maybe the GAP just isn’t as good any more at selling stuff as others.
The fact that Gap has an excess inventory from the prior season seems like a significant challenge. Gap initially wanted to get rid of the remaining merchandise from the previous season, therefore they did not update their catalog. I believe a better approach here can be, instead of physically maintaining a bulk of ready stock, retailers like Gap should implement a “pre-order” strategy. Customers today want to have access to the latest trends and newer styles. Retailers can evaluate a product’s viability by implementing a pre-order solution, which would also employ quicker inventory rotation.