Gap Stops Paying Rent and Says It May Not Have Enough Cash Left

Retailer Gap, which also operates Banana Republic, Old Navy and Athleta, is feeling a heavy impact due to coronavirus and has reported that it has stopped paying rents and it may not have enough cash for its operations.

The company announced that it has to take further action to find liquidity over the next 12 months. This could mean job cuts and new debt financing.

Gap said in a securities filing that it did not pay rent on its shuttered stores in April, which amounts to roughly $115 million in monthly expenses in North America. The company said other measures to find liquidity could include reducing receipts and orders for merchandise,and extending the terms for payment of goods and services.

Gap also said it is trying to modify the terms of its leases. In some instances, it said it will be terminating leases and permanently closing stores.

“If we are unable to renegotiate the leases and continue to suspend rent payments, the landlords under a majority of the leases for our stores in the United States could allege that we are in default under the leases and attempt to terminate our lease and accelerate our future rents due,” Gap said.

“Although we believe that strong legal grounds exist to support our claim that we are not obligated to pay rent for the stores that have been closed … there can be no assurance that such arguments will succeed.”

Disclaimer: We have no position in Gap Inc. (NYSE: GPS) and have not been compensated for this article.