Gap (NYSE:GPS) is removing more corporate jobs as it focuses on driving efficiency, the Wall Street Journal reported. Last year, in September, the apparel and accessories retailer eliminated about 500 jobs to speed up decision-making and optimize costs.
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During the Q4 conference call, Gap’s interim CEO Bobby Martin said, “We are flattening the organization” by decreasing its management layers aimed at improving the “quality and the speed of decision-making,” starting with its leadership team.
Martin highlighted that these actions would deliver $300 million in annualized savings, of which about 50% should be realized in the current Fiscal year.
Gap is aggressively cutting costs and focusing on improving its balance sheet. It has identified $550 million in annualized savings and expects most of these savings to cushion Fiscal 2023 earnings.
The company’s efforts to accelerate sales and lower costs position it well to deliver improved financial performance in the coming quarters. However, near-term pressure on consumer spending and promotional activity to reduce inventory could hurt its Q1 financial performance.
Gap expects its sales to decline in the mid-single-digit range in the first quarter of Fiscal 2023. Meanwhile, Wall Street analysts expect Gap to report a loss.
Nonetheless, the operating environment could improve in the second half of 2023, which would support its revenue and earnings.
What’s the Prediction for GPS Stock?
Given the near-term pressure on sales and margins, GPS stock has a Moderate Sell consensus rating on TipRanks, reflecting one Buy, four Hold, and four Sell recommendations. These analysts’ average price target of $11.17 implies 18.45% upside potential.
