Gap Inc. – the owner of top household clothing brands including Old Navy, Banana Republic and Athleta – says its namesake store is dragging down its overall sales and that it is looking into closing hundreds of the brand’s locations “with urgency.”
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During a call with investors late Tuesday, Gap Inc. CEO Art Peck, said sales at Gap stores have fallen 7 percent over the last 12 months, while other brands like Old Navy and Banana Republic saw a boost, forcing the company to “address” the issue.
"There are hundreds of other stores that likely don't fit our vision for the future of Gap brand specialty store, whether in terms of profitability, customer experience, traffic trends,” Peck said during the call, adding that the company is looking to make decisions about shutting down these locations “with urgency,” including closing some of Gap’s “amazing flagships.”
“I plan to exit those that do not fit the future vision quickly. I'm going to move thoughtfully but aggressively,” he noted, adding at the same time, he knows that stores are an important part of the customer's journey.
Peck said the closures could contribute to more than $100 million in earnings. Gap shares rose on Wednesday following the news.
While a formal decision has not been made, nor have specific locations been named, Peck said the company plans to give more insight on its plans for the next fiscal year. Gap Inc. has more than 3,000 stores around the world with more than 770 Gap-branded locations.
Retail business strategist and owner of 'The Retail Doctor' Bob Phibbs tells FOX Business that while this announcement doesn’t come as a surprise by any means, the timing of it wasn’t a good move.
“I can’t think of a worse time to announce this than on the eve of the biggest weekend in retail,” Phibbs said. “Customers will start to wonder if their local Gap store will still exist come January. It’s even more alarming because on the whole, retail is doing very well right now, so Gap’s decline puts them even further behind their competitors. Holiday shopping this year will be a make it or break it moment for Gap.”
Gap was founded by Donald Fisher and Doris Fisher in San Francisco, California. Next year, the clothing brand will celebrate its 50thyear in business.