Gap Plans First-Ever Round of Layoffs

The company will cut 500 to 700 jobs, mostly at headquarters.
By Tim Arango ,

Seeking to restore the luster to its flagging business, Gap (GPS) - Get Report said Thursday it will cut between 500 and 700 jobs in its first-ever wave of layoffs.

The company, founded some 30 years ago in San Francisco, will reduce its 10,000-worker office staff by 5% to 7% through attrition, elimination of open positions and layoffs, primarily at headquarters. Previously, the company hoped to expand staffing by 3% to 4% in fiscal 2001. Gap said it would take a second-quarter charge of $10 million to $20 million to cover the costs of the firings.

In addition, the company scaled back its planned square-footage growth for 2002 and 2003 to about 10%, from 15%. The company said it remains committed to long-term annual earnings growth of at least 15%, a target it hopes to achieve through a greater focus on comparable-store sales growth, margin improvement and cost management.

"We're committed to quality long-term earnings growth, with a greater focus on store profitability while continuing to invest in markets that offer attractive growth opportunities," said Gap CEO Millard Drexler in a statement.

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Gap has seen its earnings and same-store sales stall in recent years, as its clothes have fallen from favor among consumers. Thursday's announcement follows recent organizational changes aimed at sprucing up the business.

Despite widespread job cuts in the technology and media industries, among others, this is the first announcement by a major retailer that it is slashing jobs as the economy remains sluggish. While investors may praise the cost-cutting measure, it also signifies that the economy continues to be weak and follows a

dismal industrywide sales performance in May.

Shares in the company gained 91 cents to close at $33.54.

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