The company issued a dire warning in a regulatory filing Thursday that $1 billion in cash has evaporated from its accounts since February. Gap said it might have as little as $750 million in the bank as early as next week.
Gap said it needs to take “additional actions to both preserve existing liquidity and seek additional sources of liquidity” over the next year because the money it’s currently making isn’t enough to sustain operations.
It’s taking action to preserve cash, including implementing furloughs of roughly 80,000 store employees
, cutting executive pay and not paying April rent for its temporarily closed stores. The latter move is saving the Gap in $115 million in monthly expenses in North America.
The apparel company, which also has rent to pay for Old Navy and Banana Republic stores, says it’s negotiating with landlords to “modify the terms of our leases going forward after the stores reopen.” It also said it might close some stores and warned there’s “no assurance” it can favorably renegotiate the terms.
shares fell 4% at the start of trade, but then turned flat. The stock has lost more than 60% of its value so far this year.
Store closures and weakening economy as consumers shift their spending on food has slammed retailers’ finances. US retail sales slumped 8.7% in March
, their worst monthly decline on record in the data available from the Census Bureau, which dates back to 1992.
“Traditional department stores, apparel retailers and mom-and-pop shops of all types are struggling to survive, and bankruptcies will spike despite the federal assistance programs,” Kerstin Braun, president of Stenn Group, an international trade finance organization, recently told CNN Business.
“Many retailers, including Nordstrom (JWN)
, J. Crew, and JCPenney (JCP)
, were already under stress before the pandemic and many storefronts will simply not reopen.”
Prior to the pandemic, Gap was already in deep trouble. A plan to spin off Old Navy, Gap’s faster-growing budget brand, was squelched in January
. Old Navy has struggled in recent months, making separating the brands less attractive to investors.
— CNN Business’ Nathaniel Meyersohn contributed to this report.