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Gap Says It Will Pay Vendors for Orders It Canceled

Gap (NYSE: GPS) was one of the first retailers to announce it was canceling orders from vendors and suppliers as the coronavirus pandemic worsened in the U.S. It told them it would not accept the summer clothes shipments it had ordered and was canceling those for the fall season. Garment workers in Bangladesh and elsewhere worried they would lose their jobs as a result.

The retailer appears to have had a change of heart, however, and announced it will pay its vendors in full for all of those goods.

Image source: Getty Images.

Mending fences

There was some sense to Gap's refusal to accept delivery, since all of its stores were closed and it could not sell them. While that put the full burden on the vendors, and risked future orders as vendors might be leery of entering into agreements with the retailer again, Gap has decided to make them whole.

In a statement posted to its website, the retailer said: "Gap Inc. will work collaboratively with its vendors to compensate them in full for finished goods and goods in production that were canceled or subject to pack and hold. While we have extended payment terms on certain orders, in the immediate term we are providing low cost financing to our vendor partners, and are working with our banking partners to increase the amount of funds available within the program as we move forward."

A number of other retailers also ended up canceling their shipments as well, though some like lululemon athletica said they valued their supplier relationships and accepted delivery even though it meant it would raise inventory levels.

With most of its stores reopened, Gap apparently believes it can afford to do so too.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.


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