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Gap Announces Closure Of 175 Stores In North America

Gap Announces Closure Of 175 Stores In North America
Gap Store Mike Mozart / Flickr CC BY 2.0


Gap Announces Closure Of 175 Stores In North America

Gap has announced the closure of a quarter of its stores, in addition to cutting 250 corporate jobs, in an attempt to steer the struggling clothing store towards growth.

Based on store performance, there will be closures of 175 stores across North America. European stores will also suffer closures. According to USA Today, 500 Gap stores and 300 outlet stores will continue to run.

There has been a consistent shuttering of Gap stores over the last five years. The company, which also owns Banana Republic and Old Navy, suffered a 10-percent drop in same-store sales and a 5-percent slump in the first quarter.

A hundred and forty stores will be closed this year.

Pamela Quintiliano, an analyst with SunTrust Robinson Humphrey, said, “The company closed just 38 stores in North America last year, so 140 is a big number.”

Brian Sozzi of Belus Capital Advisors said, “These old guard retailers have one way to grow their profits: to close stores.”

Gap’s sales were disappointing in the first quarter of 2015, reporting a decline of 10 percent from last year. Its online sales also suffered a drop of 2 percent from last year. The company’s Piperlime branch, which sold shoes and clothes from other brands, was recently closed.

Gap’s new CEO Art Peck considers the growth of online sales as an empirical factor in the overall success of the brand.

According to CNN, he said, “Customers are rapidly changing how they shop today, and these moves will help get Gap back to where we know it deserves to be in the eyes of consumers.”

With the store closures, the sales are expected to go down by about $300 million. In addition, the company will spend $140 million in lease buyouts and employee related costs.

The new changes are steered by the partnership of Peck and Global President Jeff Kirwan. Kirwan was quoted in a statement, saying, “We’re focused on enhancing the customer experience across all of our channels, including a smaller, more vibrant fleet of stores.”

Jessica Bornn, a senior analyst with retail research firm Merchant Forecast, said, “Right now [Gap is] basically like a ship without a captain. There’s no major creative design force behind the collection. They haven’t interpreted any of the trends of the season.”

Bornn says that closing stores might be beneficial to the company.

“The number of stores a retailer should have today as a mature chain has changed,” she says. “Maybe by increasing the scarcity, that can start to improve and drive traffic to the stores.”


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