Gap Warns Of Need To Raise More Cash For Ongoing Operations

Gap has used up nearly half its cash savings even after drawing down its entire $500 million credit line and skipping April rent payments, according to a filing with the SEC. The retailer said that it lacked the existing cash and expected cash flow to fund operations, and that it would need to raise money through new debt financing or another short-term credit facility.

Gap expects to have between $750 million and $850 million in cash and equivalents at the end of the quarter ending May 2; it had $1.7 billion as of Feb. 1.

The company already has skipped rental payments totaling about $115 million in April, and is in the process of negotiating with landlords to modify some terms after stores reopen and to terminate other leases altogether. Gap said that if it is unable to renegotiate the leases, landlords could allege the company is in default under the leases and attempt to terminate the lease and accelerate future rents due.

The retailer is planning drastic measures to survive its current trials, including cutting additional expenses, further reducing its head count and extending payment terms. The company already has furloughed the majority of its associates and some corporate employees, as well as reduced the pay of its leadership team.


Gap’s efforts to raise money are also impacting the customer-facing side of the business: the retailer is advertising discounts of up to 75% on everything sold on its web site, with a discount code to add an additional 50% off, according to Business Insider. Similar discounts are being offered by other struggling retailers, including up to 60% off at Victoria’s Secret.

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