Gap Inc., a leading apparel retailer, recently announced its decision to lay off 1,800 employees in a bid to cut costs amid mounting concerns of a recession in the United States. This move comes as the company faces challenges such as slowing demand for its apparel and outdated inventory at its Old Navy brand. The current round of job cuts is expected to be larger than the approximately 500 corporate roles that Gap eliminated in September.
As of January 28, 2023, Gap had a global workforce of around 95,000 employees. The layoffs will primarily impact the company’s corporate workers, including those in its international sourcing division and San Francisco headquarters. This downsizing trend has been observed across various American firms, including tech giants like Meta Platforms Inc and Alphabet Inc, as well as consumer companies like Clorox Co and Wayfair Inc.
“To mitigate employee risks, it is crucial for retailers…
to consider the potential negative effects of layoffs on their remaining workforce. Studies have shown that post-layoff, employees who retain their jobs often experience a decline in performance and engagement.
Layoffs can also lead to increased turnover, as top performers may seek opportunities elsewhere over fears they may be next. To mitigate these risks, retailers should approach workforce reductions with caution and transparency.” says Retail Expert, Jeanel Alvarado.
Gap expects to incur pre-tax costs of about $100 million to $120 million as a result of the workforce reduction, with employee-related expenses accounting for approximately $75 million to $85 million. The layoffs are anticipated to be completed by the end of the first half of fiscal 2023.
The company reported a bigger-than-expected fourth-quarter loss in March and forecasted 2023 sales below estimates. Consumers, particularly those in the lower- to mid-income bracket, have reduced spending on non-essential items, which has negatively impacted sales across all four of Gap’s brands in the fourth quarter…
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