It looks as if Gap has simply given up
It's just straight-up bleak at Gap.
Gap is showing its beleaguered investor base yet again that it's a retailer looking like it has flat-out given up on any chance of being around in 10 years.
Sales fell in all four divisions, paced by a dismal 9% drop at the former top mall destination Gap.
Gap stock (GPS) fell more than 6% in pre-market trading on Friday following another disappointing holiday quarter. Dig deep into the results and the signs of a retailer growing irrelevant — and management realizing just that — aren't hard to find.
Ending inventory plunged 21% from the prior year as the company pushed through deep sales to clear excess inventory, notably at the once-hot Old Navy division (where sales fell 6% in the quarter).
Ideally, in an economy that's still growing, a fundamentally solid retailer would be buying inventory to sell to human beings — not slashing and burning inventory in an attempt to raise cash (among other levers the CFO hopes to pull).
At its current inventory levels, a trip to Gap, Old Navy, Banana Republic and Athleta this spring could be a quick one as your sizes (or style preferences) may simply not be on the rack.
Another reason why Gap looks like it's throwing in the towel: The company unveiled a new $300 million cost-cutting effort fueled in part by "decreasing management layers."
In other words, Gap is canning more higher-ups that theoretically could be working to plot some form of epic turnaround. No management, no long-term strategic planning, no turnaround. Simple equation.
'I guess no more growth or talent!'
Gap says it has now identified $550 million in cost savings in the past six months. That may help to make an earnings number in the second half of this year, but it does nothing to set the company up for lasting success.
The company also revealed that it sacked its Chief Growth Officer (CGO) Asheesh Saksena. Saksena joined Gap only two years ago after serving as an advisor to the CEO of Best Buy. The growth officer role at any company is often focused on —you guessed it — strategizing on how best to grow the organization in the near term, medium term and long term.
Did we mention Gap also booted its Chief People Officer Sheila Peters? The chief people officer focuses on how best to manage the people in an organization and get the most out of them (by and large).
Basically, Gap is actively eliminating roles that are supposed to assist in effectively running a thriving company.
"I guess no more growth or talent!" one long-time Gap watcher told Yahoo Finance via email.
One Gap insider recently told Yahoo Finance that how the iconic retailer's apparent demise plays out will fall on the next CEO, who this person said is "close" to being hired — some eight months after the firing of CEO Sonia Syngal. That inability to secure a new CEO speaks volumes to where Gap is today.
Gap, for its part, has a different take on these people moves.
"We believe our best opportunities for growth are in our brands and through our strategic partnerships, including the various market partnerships we’ve entered over the past 18 months to amplify our brands internationally in a more asset light way," Gap spokesperson told Yahoo Finance by email. "At the same time, the changes we are making overall are designed to flatten the organization by increasing spans of control and decreasing layers to improve quality and speed of decision making. And the elimination of the CGO role is an example of that."
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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