Business of Fashion: Gap to Close Multiple Old Navy and Banana Republic Retail Stores
Gap is planning to shut down roughly 75 global Old Navy and Banana Republic retail stores in an effort to increase their North American footprint. After disappointing first quarter sales, the retailer decided to scale back internationally by closing stores in Japan (all 53 Old Navy outlets), Asia and Europe.
As of April 30 a total of 1,029 Old Navy stores were recorded in North America and 69 in Asia, while 607 Banana Republic stores were recorded in North America and 61 in Asia and Europe. The company expects the closures will result in an annualized sales loss of approximately $250 million, but will help save $275 million on an annualized pretax basis. The company also mentioned its plans to streamline its operating model to better react to customer demands.
Chief Executive Art Peck commented: “I’m obviously disappointed that we’re going to be discontinuing operations. But I view it as a sign of a good company that you acknowledge when a business isn’t going to deliver.”
Gap reported its net sales for Q1 fell roughly 6% to $3.44 billion, with profits totaling $127 million, a decline of 46.9%. Peck’s response: “unacceptable.”
Amidst millennial retail hubs such as H&M and Zara, Gap plans to continue its efforts in offering better products and quality. Peck said that the problem with Old Navy was that “[the company] leaned too heavily on fashion pieces instead of basics, and it had too many duplication in its assortment of clothes.”
Will Peck’s plan revive sales and consumer interest in these retailers? As the second quarter progresses, half-year figures will hopefully be able to paint a clearer picture.by