Gap Inc (GPS.N) warned on Thursday it may not survive the next 12 months intact and would need to borrow more funds in the face of widespread coronavirus shutdowns that have crippled the business of clothing retailers globally.
The apparel retailer also said it had suspended rent payments for shuttered stores, and was in talks with landlords to defer payments, change lease agreements, or in some cases terminate the leases and permanently close some stores.
Gap said the suspended rents in North America would have amounted to about $115 million per month.
Brick-and-mortar retail chains are facing an unprecedented sales downturn as the coronavirus shutdowns drag on, forcing them to cut costs and tap credit lines to stay afloat.
Luxury retailer Neiman Marcus is preparing to seek bankruptcy protection as soon as this week, while other department store operators are battling to avoid the same fate.
Like many in corporate America, Gap has already withdrawn its full-year targets, suspended dividend, furloughed employees and drawn down its existing credit lines.
The retailer, which owns Banana Republic and Old Navy, said it expects to have $750-$850 million of cash and cash equivalents, inclusive of short-term investments, at the end of the fiscal quarter ending May 2.
In order to have sufficient liquidity for the next 12 months, the company said it would need to tap the debt market, cut jobs, defer capital expenditures and cut back on orders from vendors.
“There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have … and the steps we may need to take to address those impacts, are highly uncertain,” Gap said.