Gap Plans to Compensate Suppliers for Canceled Orders
(Bloomberg) -- Gap Inc. will work collaboratively with its vendors to compensate them in full for finished goods and goods in production that were canceled or subject to pack and hold.
The owner of the Old Navy and Banana Republic apparel chains has also extended payment terms on certain orders and is providing low-cost financing to suppliers, according to a statement Friday on the San Francisco-based company’s website. It’s also working with banks to increase the amount of funds available within the program.
Gap said last month it was sorting products it can sell now from those that it can store for later, identifying “planned orders that we will not place and -- where necessary -- those orders we need to cut.”
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 canceled orders represent less than 3% 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.
©2020 Bloomberg L.P.