Gap Inc.’s COVID-19 Survival Measures: Stop Paying Rent
Gap Inc. disclosed that it was taking a number of measures to stay afloat during the COVID-19 crisis. It is one of many prominent companies scrambling for support during the economic shutdown caused by the pandemic.
The San Francisco–based specialty-retail giant announced in an April 23 filing with the U.S. Securities and Exchange Commission that it would suspend rent payments for stores closed due to the COVID-19 pandemic. The money Gap Inc. typically spent on monthly rent in North America is $115 million. It runs more than 2,780 stores under the nameplates of Gap, Banana Republic, Old Navy, Athleta and Intermix. In the SEC filing, Gap Inc. said that after the crisis it would seek to terminate leases and permanently close some stores.
In the SEC document, Gap outlined other big steps to navigate the crisis. These included withdrawing the entire $500 million available on its revolving-credit facility. It would also suspend its regular quarterly cash dividend for shareholders for the remainder of the 2020 fiscal year. Gap also said that it would reduce planned capital expenditures by approximately $300 million during the 2020 fiscal year.
The filing also disclosed the company’s liquidity situation. On Feb. 1, more than a month before the economic freeze, Gap Inc. had cash, cash equivalents and short-term investments of $1.7 billion. By May 2, the specialty retailer is forecasted to have $750 million to $850 million in cash and cash equivalents. The company also forecasted that it would seek to increase liquidity through debt financing. It also plans to further reduce operating expenses and further reduce orders for merchandise as well as extending the terms for payments of goods and services.