Gap Inc. became the latest retailer to furlough employees en masse while stores remain closed because of the coronavirus spreading through North America and Europe.
On Monday, the owner of Old Navy, Banana Republic, and Gap said that stores in those markets would stay closed past the initial April 1 date on which the company had hoped to reopen stores. Earlier on Monday, Macy’s announced it was furloughing the majority of its 130,000 workers.
Gap Inc. had taken steps in recent weeks to stanch the outflow of cash while much of its business ground to a halt, such as drawing down its $500 million credit line, suspending its dividend, and cutting capital expenditures. But the threat to Gap Inc. has only worsened since stores closed on March 18.
“We are now in a position where we must take deeper actions,” said Gap Inc. CEO Sonia Syngal, who took the reins earlier this month after years as head of Old Navy. In addition to the furloughs, Gap Inc. is laying off some staff at its San Francisco headquarters.
Before the outbreak, which has sickened at least 150,000 Americans so far and decimated company sales in March, Gap Inc. was already dealing with enormous challenges. Its namesake brand has been in decline for years, hurt by merchandise that has failed to stand out. Banana Republic has been hurt in recent years by the growth of casual wear. And Old Navy, long its juggernaut, has experienced an uneven performance in the past year. Prolonged closings will only make it harder for Gap Inc. to implement its plan to win shoppers back.
Gap Inc.’s problems also illustrate how even brick-and-mortar retailers adept at e-commerce won’t be spared by the economic toll of the pandemic. The company garners about 20% of its sales online, amounting to more than $3 billion. But people’s spending has shifted to essentials rather than clothing during the crisis, all the more since tens of millions of Americans are working from home and can’t go out.
In addition to the furloughs, Gap Inc. said its top executives and directors would take a compensation cut.
With GlobalData Retail estimating that some 40% of all American stores are closed, the industry, particularly apparel chains, is bracing for more furloughs on a scale that will shake the entire economy: 52 million Americans work in retail in the United States. Last week, the Labor Department said that a record 3.3 million Americans had applied for unemployment benefits the week before.
Other retailers that have recently announced furloughs of store workers include Ascena Retail, which owns Ann Taylor and Lane Bryant; Tailored Brands, owner of Men’s Wearhouse; and Bath & Body Works parent L Brands.
More must-read retail coverage from Fortune:
—Everything you need to know about furloughs
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—How re-commerce players like Poshmark and eBay are adapting to the coronavirus
—How Nike is overcoming the coronavirus impact on its China business
—It may be a while before many of America’s stores open again
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEOs
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