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Jul 10, 2020

Gap cancels merchandise orders over virus-driven drop in demand

Notable Calls: Nike, Gap and DraftKings

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Gap Inc. is cancelling some merchandise orders and warehousing others amid a drop in consumer demand fuelled by Covid-19.

The owner of the Old Navy and Banana Republic apparel chains is sorting products it can sell now from those that it can store for later, according to a statement on the San Francisco-based company’s website. Gap is also identifying “planned orders that we will not place and — where necessary — those orders we need to cut.”

“We recognize the enormous pressures our vendors are under as a result of this crisis, and the demands that apparel brands and retailers are placing upon them during this time,” Gap said, adding it has sought to mitigate impact on suppliers’ employees and operations.

The company said it is meeting with vendors individually to evaluate orders, assess their situation and establish new plans.

Economic lockdowns and quarantines have upended the apparel industry in the U.S. and beyond, with consumers reducing discretionary spending due to rising unemployment and the fear of job losses. The company is trying to renegotiate rent payments with landlords, and is working to align its inventory with demand. Net sales fell by 43% in the latest quarter amid widespread store closings.

Gap said the cancelled orders represent less than three per cent of the total “by value for finished garments and garments in production.” The company said it’s trying to help suppliers liquidate products that weren’t purchased and is trying to find a use for uncut raw materials for future seasons.