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A sign hangs above the entrance of a Gap store in Chicago, Ill., Oct. 13. Gap Inc. plans to reduce the number of Gap brand stores to 700 in North America, closing roughly one-third of its existing stores by the end of 2013. (Scott Olson/Getty Images)
Long-struggling apparel retail giant Gap Inc. said Thursday that it is shifting its focus to international markets, and that it would close more than a third of its U.S. Gap brand stores.
In a statement Thursday, the San Francisco-based company said it would shutter “700 Gap specialty stores and about 250 Gap Outlet stores by year end 2013,” due to continued weak sales in North America, a market which is hampered by a sluggish economic recovery.
The store closures represent a 34 percent decline compared to the number of its namesake Gap stores as of the end of 2007. Sales from Gap constitutes roughly a quarter of the company’s total revenues.
At an investor conference in New York Thursday, Gap said that the number of Old Navy stores will remain the same, although square footage is expected to decrease. Overall, across all of its retail stores—including Banana Republic—Gap is expected to decrease retail square footage by 10 percent by the end of 2012. “In North America, sales are expected to grow modestly on its smaller, healthier specialty store fleet supplemented by sales growth in its online and outlet channels,” Gap said in a statement.
Gap did not specify which stores it would close, although a report by the New York Observer cited insiders saying that a quarter of New York-area stores are on the chopping block.
The company has been trailing rivals in recent years as consumers have moved to more trendy shops for apparel, although recently Gap has had success with its premium denim line at Gap branded stores and upscale specialty apparels at Banana Republic. “Gap, Banana Republic and Old Navy now have shorter core product pipelines, which allow the brands to more quickly respond to changing consumer trends and product demand. Each brand is also pursuing new product categories and product partnerships,” Gap said Thursday.
Gap has had recent success with its newer brands Piperlime and Athleta, which sell women’s clothing and women’s athletic and yoga clothing, respectively. Those two are the only Gap retail stores that will expand in the coming quarters.
Art Peck, president of Gap North America, said that the company has strayed away from its traditional offerings of Gap brand, which is jeans and casualwear with an American flair, according to an interview with Reuters Tuesday. The brand has dabbled in other offerings across different segments, and no longer has its original identity.
In addition, Gap has been faced with increasing competitive pressure from American brands such as Abercrombie & Fitch Co., American Eagle, as well as Japanese retailer Uniqlo, which is owned by Fast Retailing.
Expansion Abroad
While Gap downsizes in the United States, the company expects to triple its store presence in emerging market China. While it currently has 15 stores in China, Gap plans to expand that number to more than 45 by 2013. It opened its first store last year.
Gap plans to open its namesake flagship store in Hong Kong in the near future, and has another Banana Republic flagship planned in Paris. It will open a giant Old Navy store in Japan next year.
“The combination of our global strategy and formidable growth platform puts us in a strong position to expand our reach into the top 10 apparel markets worldwide,” said Glenn Murphy, chairman of Gap in a statement.As of the third quarter, Gap has almost 3,500 stores, both company-operated and franchised, in 36 countries.
