Shares of Gap Inc. fell after hours Thursday after the clothing retailer forecast falling sales and said it would cut executives and thin out its layers of management, as it tries to slash costs following last year’s upheaval in apparel demand.
Thank you for reading this post, don't forget to subscribe!Executives said they had eliminated the role of chief growth officer, held by Asheesh Saksena. Sheila Peters, chief people officer at Gap, will also depart at the end of the year. Gap said it was close to choosing a new chief executive, after Sonia Syngal stepped down in July.
The company said that they would be “decreasing management layers” and taking other steps to simplify operations — moves they said would save $300 million. The decisions, they said, “will incur severance and other related costs.”
Elsewhere, Gap
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said that Mary Beth Laughton, chief executive of athletic clothing store chain Athleta, was departing, after the line suffered from “product acceptance challenges over the past several quarters.” A search for her replacement is underway, the company said.
Gap — which along with Athleta also owns Old Navy and Banana Republic — said first-quarter sales could fall “in the mid-single-digit range” compared to the same quarter last year. For the full year, they said sales could also fall “in the low- to mid-single-digit range.” Analysts polled by FactSet expected sales to grow for the full year.
“While we are better-positioned as we enter fiscal 2023, we continue to take a prudent approach to planning and managing our business in light of the continued uncertain consumer and macro environment,” Chief Financial Officer Katrina O’Connell said in a statement.
For its fourth quarter, Gap reported a net loss of $273 million, or 75 cents a share. In the same quarter last year, the company lost $16 million, or 4 cents a share.
Revenue fell 6% to $4.24 billion, compared with $4.53 billion in the same quarter a year ago. Same-store sales fell 5%. The retailer closed out the year with lower merchandise inventories.
Analysts polled by FactSet expected Gap to report an adjusted loss of 46 cents a share, on revenue of $4.36 billion. They expected same-store sales to fall 3.1%.
Shares tumbled 3.2% in after-hours trading Thursday.
Gap reported earnings after laying off staff last year and making other cost cuts, as it tries to differentiate itself in the apparel world and retailers grapple with a drop in clothing demand. Old Navy has struggled. The company is closing dozens of Gap and Banana Republic stores. Management said on the company’s earnings call on Thursday that stores didn’t have enough “newness” in their selections.
Other chains last year slashed prices to in an effort to clear bloated stocks of apparel and other goods, from which many consumers steered clear as rising costs of living forced them to cover basic needs. Many retailers, in earnings reports over the past month, have leveled out their inventories. But amid subdued demand, there’s still room for products to stay cheaper, some executives and analysts suggest.
Gap has also had problems specific to the rapper and fashion designer Kanye West, who goes by Ye. The two in September ended their collaboration to sell a new line of Yeezy Gap clothing last year, after West’s frustrations with the company. Gap announced the partnership with West in 2020.
Gap, in its third quarter, booked a $53 million impairment related the termination of the collaboration and leftover products. On Thursday, executives said the shutdown of Yeezy Gap hit growth in North America by around 2 percentage points.
Shortly after, sneaker maker Adidas AG
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terminated its partnership with West after West made a series of antisemitic remarks. Adidas is still trying to figure out what to do with all the Yeezy sneakers that it’s still holding.
