Simon Property Group sues Gap over unpaid rent

Yahoo Finance's Emily McCormick joins The First Trade to break down Gap's response to a lawsuit filed by the mall owner Simon Property Group against the retailer.

Video Transcript

ALEXIS CHRISTOFOROUS: COVID-19 we know continues to take its toll on retail, and Gap posted a loss in its first-quarter earnings report, but it also is in some pretty hot water with Simon Property Group over not paying its rent. Yahoo Finance's Emily McCormick is here now with the details. And, Emily, I know Gap addressed this on their earnings call. What did they have to say?

EMILY MCCORMICK: Absolutely, Alexis. So we do see Gap shares, it should be noted, rising in the premarket, up more than 6%, although it still is down steeply, about 30% for the year to date.

And one of the things that was a green shoot on that earnings call yesterday was when Gap's CFO Katrina O'Connell said, quote, "Because of the current environment, we're actually using this opportunity to talk through virtually almost every property and lease with every landlord. One of our primary objectives is to use this opportunity to partner with our landlords to come out with a better profitability for a company," end quote.

So I do want to note that mall-owner Simon Property Group did file a lawsuit against Gap on Tuesday over what they said was unpaid rent and other charges amounting to more than $60 million, saying that Gap did withhold rent for April through June. But based on what we heard on that earnings call yesterday, that is something that Gap has acknowledged and is working through with its landlords.

And then just taking a look at the results we got for the fiscal first quarter, we did see the company swing to a loss, and net sales of $2.1 billion were down 43% over last year and did miss expectations. We saw our net sales across Gap's brand still on the decline. But again, taking a look at the stock here, we do see it still rising in the premarket. Alexis.