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Gap plans to lay off hundreds of corporate workers in latest cuts

Gap leaders conducted a review with the goal of stripping out layers of management to speed decision making. Most of the layoffs will be of middle management.

Gap Inc. is eliminating hundreds of corporate jobs from its global workforce as part of a broad restructuring aimed at making the company more nimble and less bureaucratic, according to people familiar with the situation. 

The current round of cuts is slated to be larger than in September, when Gap eliminated roughly 500 corporate positions, one of the people said. Those job cuts were mostly at its main offices in San Francisco and New York, and were part of efforts to save about $250 million annually.

More recently, the leaders of each of the company’s brands—Gap, Old Navy, Banana Republic and Athleta—have been conducting a wide-ranging review with the goal of stripping out layers of management to speed decision making, the people said. 

"Our goal is to flatten the organization, increase spans of control to create more robust roles and individual empowerment, and decrease layers to remove bottlenecks and make better, faster decisions," according to a memo from Gap Chairman and interim Chief Executive Bob Martin to employees last week.

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In March, Gap said it identified an additional $300 million in cost cuts, including by stripping out layers of management. At the time, company leaders didn’t say how many jobs would be lost. But it announced the elimination of one high-profile position, that of chief growth officer.

The company began notifying employees it planned to lay off in its international sourcing division on April 18. It plans to inform staff about prospective layoffs at its San Francisco headquarters this week. The finance team will be apprised in late May, according to the memo.

The moves come as Gap continues to operate without a permanent leader after its previous CEO stepped down in July. Mr. Martin said in March that the board was close to picking a new CEO, adding that the person would come from outside the company.

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A range of companies have announced layoffs in recent months, including the corporate parents of Facebook and Google as well as Dow Inc. and 3M Co., amid fears of a softening economy or to seek efficiencies. 

E-commerce company Mercari Inc. plans to cut 20% of its U.S.-based staff and shift a number of employees tasked with growing the U.S. business to focus on customers in its home market of Japan, according to a memo sent recently to employees. The Tokyo-based company entered the American market less than a decade ago aiming to challenge companies such as Amazon.com Inc. and eBay Inc., but its business has been declining in recent quarters.

Gap’s restructuring is more about addressing years of growing bureaucracy that has made the company inefficient, the people said.

Gap had become too siloed with executives more worried about protecting their turf than creating products that resonate with shoppers, the people said. Style decisions were bogged down in endless meetings, they said.

Over the past year, the company has contended with a misfire at its Old Navy chain, when a plan to make clothing sizes for everyone backfired, a pile of excess inventory and a messy breakup with the musician and designer Kanye West.

For the fiscal year that ended Jan. 28, net sales fell 6% to $15.62 billion. The company swung to a loss of $202 million from a profit of $256 million in the prior fiscal year. 

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Gap employed about 95,000 people worldwide as of late January, most of whom work in retail locations. Roughly 9% of its staffers work in headquarters locations, the company said. 

Its shares are down 14% over the past 12 months through Monday’s close, compared with a more than 3% decline in the S&P 500. 

Megumi Fujikawa contributed to this article.

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