As we have long forecast, the worst in retail is yet to come.
Last week, Simon Property Group, the U.S.’s biggest mall owner, filed suit on 2 June in a Delaware court against Gap Inc., its biggest tenant, for more than $65.9 million in unpaid rent and to ensure future rent payments.
Gap leases 412 Gap, Banana Republic, and Old Navy store sites in Simon’s malls, making it Simon’s chief rent payer. Simon owns more than 100 malls and more than 100 other retail properties in the U.S.
Gap announced in April it would stop paying $115 million a month in rent to its landlords. It also has furloughed 80,000 store workers and announced in May that it was down to its last $750 million in cash, about enough to survive for a month.
“The bottom line is, we do have a contract and we do expect to get paid,” said David Simon, Simon Properties’ CEO.
Gap Reveals Magnitude of Quarter’s Loss
During its operating quarter that ended 2 May, Gap Inc. saw overall sales fall 43 percent while its stores were closed for much of the time but online sales more than doubled.
Overall sales totals continued to decline into the new quarter, said Sonia Syngal, Gap CEO.
For the quarter, Gap reported a $932-million loss, or $2.51 per share, on revenue of $2.11 billion, compared to a profit of $227 million and 60 cents a share on sales of $3.11 billion a year previous.
The company owns the Gap, Banana Republic, Old Navy, and Athleta labels.
The quarter’s losses came largely from a $484-million writedown on assets and a $235-million “inventory impairment charge.”
Gap brand in-store sales were down 50 percent and online sales off 5 percent from a year earlier. Sales for Old Navy, a value brand oriented toward families, were off 42 percent in stores but rose 20 percent online. Athleta, which sells sports togs for women, sold 49 percent more goods on the web and 8 percent less in stores.
Banana Republic, which has geared its product line toward office wear, saw brick-and-mortar sales plunge 47 percent and online sales edge down 2 percent.
Banana Republic’s clothing line is being recast in anticipation of more office workers permanently shifting to being home-based.
More than 1,500 Gap stores had reopened as of 4 June, about 55 percent of the company’s outlets, with all stores scheduled to be open by July.
Gap share prices have fallen about 31 percent since December 2019.
