According to the Business Journal,The Gap Inc. (GPS), a premier international specialty retailer plans to shut down 200 stores within the span of two years.
Although the company has not mentioned the specific stores that it intends to close, it has stated that by 2013, the store count in North America would be down to 700. Total Gap Outlets will, however, increase to about 250 stores, a net addition of 50 or 60 stores. Around 40 of these will be Banana Republic Factory stores, which will then total 150.
Management at The Gap states that the stores need to undergo a complete change in terms of product, stores and of course marketing in North America. The company intends to change from a completely specialty retailer into a level player, wherein it can offer its products at competitive prices. This will not only boost its sales, but also its profitability.
Gap has been witnessing lackluster sales in North America with a record drop of 10% in same store sales for the month of March 2011. Also, during the first quarter of 2011, the company witnessed declines in same store sales across all its North American brands.
Further, during the first quarter of 2011, The Gap’s operating income plunged 22.8% year over year to $233.0 million, while its operating margin fell 200 bps to 7.1%. However, management expects operating margin to grow by about 13.4%.
The Gap is one of the leading players in the highly fragmented specialty retail sector, offering a diverse range of clothing, accessories and personal care products for men, women, children and babies. Its flagship brands include Gap, Banana Republic, Old Navy, Piperlime and Athleta. The Gap’s globally recognized brands complement one another, enabling it to leverage its position in the sector.
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