Shares of Gap (NYSE:GPS) were lower on Tuesday after the company said that it will furlough most of its store employees in the U.S. and Canada, as it stores remain closed due to the coronavirus pandemic.
As of 3 p.m. EDT today, Gap's shares were down about 4.2% from Monday's closing price.
In a statement signed by CEO Sonia Syngal and the company's chairman, Bob Fisher, Gap said on Monday afternoon that it will furlough most of its store teams in the U.S and Canada -- over 80,000 employees in total. (It's likely that store teams in Europe and Mexico will soon follow.)
Gap had been paying those employees, and providing full benefits for those who qualified, since closing its brick-and-mortar stores earlier in March. While Gap will no longer pay those employees, those who had benefits before the stores closed will continue to receive them for the time being, the company said.
Gap will also soon begin cutting employees in its offices and headquarters, it said, but gave no details. Gap's directors and senior leadership team, including Syngal and Fisher, will take pay reductions.
It's sad news, but for investors who have been paying attention, it's not surprising. With about 90% of its stores around the world closed due to the coronavirus pandemic, Gap is facing a huge revenue shortfall.
The good news is that Syngal, the former Old Navy brand chief who rose to the top job just a few weeks ago, has about $1.7 billion in cash to work with. That seems likely to be enough to get through the pandemic and the aftermath, but given the uncertain timeline here, she and her team are right to be trying to make it last as long as possible.