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Coronavirus Update: San Francisco-Based Gap Issues Frightening Report Of Pandemic Financial Woes

SAN FRANCISCO (CBS SF/CNN) -- The ongoing coronavirus outbreak has rocked the nation's retail industry including San Francisco-based clothier Gap Inc. which reported Wednesday it was running out of cash.

When shelter in place orders swept the nation in mid-March, the company announced it was temporarily closing its Old Navy, Athleta, Banana Republic, Gap, Janie and Jack and Intermix company owned and operated stores across North America effective March 19. The stores have yet to reopen.

In a federal securities filing, Gap officials said the apparel company now must take further actions to find liquidity over the next 12 months including job cuts and new debt financing.

The company reported that $1 billion in cash has evaporated from its accounts since February. It might have as little as $750 million in the bank as early as next week.

Gap said it needs to take "additional actions to both preserve existing liquidity and seek additional sources of liquidity" over the next year because the money it's currently making isn't enough to sustain operations.

It's taking action to preserve cash, including implementing furloughs of roughly 80,000 store employees, cutting executive pay and not paying April rent for its temporarily closed stores. The latter move is saving the Gap in $115 million in monthly expenses in North America.

The apparel company, which also has rent to pay for Old Navy and Banana Republic stores, says it's negotiating with landlords to "modify the terms of our leases going forward after the stores reopen." It also said it might close some stores and warned there's "no assurance" it can favorably renegotiate the terms.

Gap shares fell 4% at the start of trade, but then turned flat. The stock has lost more than 60% of its value so far this year.

Store closures and weakening economy as consumers shift their spending on food has slammed retailers' finances. US retail sales slumped 8.7% in March, their worst monthly decline on record in the data available from the Census Bureau, which dates back to 1992.

"Traditional department stores, apparel retailers and mom-and-pop shops of all types are struggling to survive, and bankruptcies will spike despite the federal assistance programs," Kerstin Braun, president of Stenn Group, an international trade finance organization, recently told CNN Business.

"Many retailers, including Nordstrom, J. Crew, and JCPenney, were already under stress before the pandemic and many storefronts will simply not reopen."

Prior to the pandemic, Gap was already in deep trouble. A plan to spin off Old Navy, Gap's faster-growing budget brand, was squelched in January. Old Navy has struggled in recent months, making separating the brands less attractive to investors.

© Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten. CNN contributed to this report.

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