Will Gap Be a Casualty of the Pandemic?
The retail icon was in trouble before COVID-19 reached the U.S.
The demise of the American mall has been well-documented, but many of the retailers anchoring those malls have reorganized their way out of oblivion. Sears, for example, is still somehow chugging along even after declaring bankruptcy. But the coronavirus pandemic is a disaster no one saw coming, and it might be too big a wrecking ball for even the most iconic brands to dodge.
In a new in-depth look at Gap, Marker’s Rob Walker writes that, after half a decade of emblazoning the chests of Americans with their iconic logo, the storied clothing company may finally go under because of COVID-19.
A quick look at parent company Gap Inc.’s numbers for 2019 seem to show a brand that still holds massive retail clout, what with revenue over $16 billion and 3,900 stores, including Gap and other brands like Banana Republic, Old Navy and Athleta. Even more recent numbers showed promise; on an April 9 investor call cited by Marker, the company said it started February with $1.7 billion in cash.
“But then, late last week, Gap Inc. warned that it had blown through about half that cash, thanks to its largely idle store fleet, and had thus raised $2.25 billion in secured (junk-rated) debt and other financial maneuvers,” Marker reported. And that’s not the only problem they’re encountering. While there has been an increase in online shopping, the backlog of inventory at brands like the Gap means they’re offering Black Friday-level sales just to move product (at the time of writing, it’s up to 75 percent off everything), and many people are focusing on paying for essentials like rent and food rather than clothing they would normally buy.
“This is accelerating pre-existing trends,” Andrew Lipsman, principal analyst at eMarketer, told Marker. “Already a lot of mall-based retailers were in a tough spot — and those are the ones that are going to take the toughest hit.”
That doesn’t necessarily mean Gap is on the way out, though. The brand has a tough year ahead, which may lead to more store closures or even a total rethinking of their retail strategy and identity. Or it may lead to their demise, which, ironically, would no doubt lead to an increase in demand for those classic Gap sweatshirts.
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