Gap Inc said its existing cash levels and credit facilities may not be sufficient to run its business and it would have to take additional measures such as job cuts and new debt financing within the next 12 months to boost its liquidity.

Gap said in a regulatory filing, “As we continue to manage through the impacts of the COVID-19 pandemic in fiscal 2020, it continues to negatively impact our operations and liquidity. We will need to take additional actions to both preserve existing liquidity and seek additional sources of liquidity, beyond our currently available cash and credit facilities within the next 12 months as existing cash and cash expected to be generated from operations may not be sufficient to fund our operations. We expect that the additional actions to preserve and improve our cash position during the pandemic will include some combination of new debt financing or other short-term credit facility and further deferring capital expenditures, further reducing headcount, further reducing operating expenses, further reducing receipts and orders for merchandise, and extending the terms for payment of goods and services. There can be no assurance that we will successfully complete these actions.”

The filing also noted a number of steps Gap has already taken to mitigate the impact of store closures due to the pandemic, including reducing expenditures, overall headcount and pay for management. The retailer has also drawn down borrowings and suspending stock repurchases.

In the filing, Gap also noted that beginning in April 2020, it suspended rent payments under the leases for these stores, which approximate $115 million per month in North America.

Said the company, “We are currently negotiating with the counterparties under those leases to defer or abate the applicable rent during the store closure period, to modify the terms (including rent) of our leases going forward after the stores reopen, or in certain instances to terminate the leases and permanently close some of the stores. However, there can be no assurance that we will be able to negotiate rent deferrals or rent abatements, or terminate the leases, on commercially reasonable terms or at all.”

Gap’s banners include Gap, Old Navy, Athleta, and Banana Republic.

Photo courtesy Gap