Gap Inc., plans to close about 200 Banana Republic and Gap stores over the next three years, while opening new Old Navy and Athleta locations, shifting its footprint to budget and athletic brands as shoppers search for bargains.
At an investor conference Wednesday, Chief Executive Art Peck said the company's online and lower-priced businesses are more profitable and attracting more shoppers than its specialty businesses, which include Gap and Banana Republic. "We will continue to move in this direction," he said, "and selectively diminish our exposure to specialty."
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Over the same period as the Gap and Banana Republic closures, the company expects to open about 270 new Old Navy and Athleta stores. The company is also exploring smaller-format stores in cities.
Wardrobe basics have evolved since Gap's heyday, with many customers swapping out its casual uniform for yoga attire. Gap brand and Banana Republic have been getting squeezed as more niche brands chase an affluent customer, and fast-fashion and off-price chains woo the frugal. Sales at both divisions fell last quarter compared with the year-earlier period.
Old Navy, Gap's budget brand and biggest division by sales, has been a bright spot for the company, helping to shore up its results even as other brands have struggled. Mr. Peck on Wednesday referred to Old Navy as pulling the company and noted that Gap and Banana Republic are still recovering from past "creative mistakes."
Gap said it expects Old Navy sales to exceed $10 billion over the coming years. It expects Athleta, its athletic-wear brand, to exceed $1 billion in sales during that time.
Since he became CEO in 2015, Mr. Peck has closed hundreds of stores, eliminated creative directors and expanded the role of outside vendors. The former management consultant has also emphasized the use of market-research data to monitor trends.
The latest closures, which the clothing retailer said would focus on underperforming, "lower-productivity" locations, represent about 10% of Gap's global Banana Republic and flagship stores, according to its financial results reported in August. Across all its apparel brands, it has about 3,600 company-operated and franchise stores.
It expects to save about $500 million over that period as a result of the closures and other operational changes.
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(END) Dow Jones Newswires
September 06, 2017 12:50 ET (16:50 GMT)