Gap to compensate suppliers for cancelled orders

July 14, 2020 - United States Of America

Gap Inc. will work collaboratively with its vendors to compensate them in full for finished goods and goods in production that were cancelled or subject to pack and hold, according to the San Francisco-based company, which recently issued a statement saying it has also extended payment terms on certain orders and is providing low-cost financing to suppliers.

The owner of Old Navy and Banana Republic apparel chains said it is also working with banks to raise the amount of funds available within the programme.

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.”

The company is trying to renegotiate rent payments with landlords, and is working to align its inventory with demand. Net sales fell by 43 per cent in the latest quarter amid widespread store closings.

Gap said the cancelled orders represent less than 3 per cent of the total ‘by value for finished garments and garments in production’. The company said it is trying to help suppliers liquidate products that weren’t purchased and is trying to find a use for uncut raw materials for future seasons.

In April, Gap Inc started actively working with vendors to manage its product pipeline and right-size its inventory. It also shifted capacity in some factories for making PPE—all with a goal to provide transparency and clarity to its supply chain partners as the company works through the issues due to the COVID-19 crisis.