Gap to close 175 namesake stores in North America, lay off 250 HQ employees

San Francisco — Gap Inc. on Monday lowered the boom on its biggest and most troubled division, announcing it would close 175 of its 675 namesake stores in North America over the next few years, with 140 of the closures occurring in the current fiscal year. In line with the closings, the brand’s headquarters workforce will be reduced by about 250 roles this year.

The closings will not impact Gap Outlet and Gap Factory Stores. Gap will also close a limited number of European locations, but it did not give a specific store count.

Gap estimates an annualized sales loss of about $300 million associated with the store closures. It will also take a one-time cost of up to $160 million.

“Returning Gap brand to growth has been the top priority since my appointment four months ago – and Jeff (Jeff Kirwan, global president of Gap) and his team bring a sense of urgency to this work,” said Art Peck, who became CEO of Gap Inc. in February. “Customers are rapidly changing how they shop today, and these moves will help get Gap back to where we know it deserves to be in the eyes of consumers.”

Gap posted a 10% decrease in same-store sales for its latest quarter, through May 2, which helped to drive an 8% decline in earnings to $239 million.

Gap estimates an annualized sales loss of about $300 million associated with the store closures. It will also take a one-time cost of up to $160 million. The company estimates annualized savings from these actions to be approximately $25 million, beginning in 2016.