Gap to close 175 stores, lay off 250 employees
Gap Inc. is planning to close 175 of its Gap stores and streamline its workforce by as many as 250 positions as the struggling retailer moves to re-ignite productivity and growth at its namesake brand.
The company says the series of strategic actions are part of a comprehensive effort to deliver more consistent and compelling product collections and engage customers across all channels.
“Returning Gap brand to growth has been the top priority since my appointment four months ago – and Jeff and his team bring a sense of urgency to this work,” said Art Peck, Gap Inc. chief executive officer. “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 says it will close about 175 specialty stores in North America over the next few years, with about 140 closures occurring this fiscal year. These changes will not impact Gap Outlet and Gap Factory Stores. In parallel with these moves, the brand will close a limited number of European stores during this period.
“Our customers and employees want Gap to win,” said Jeff Kirwan, global president for Gap. “We’re focused on offering consistent, on-brand product collections and enhancing the customer experience across all of our channels, including a smaller, more vibrant fleet of stores."
The reduction of the brand’s headquarter workforce, primarily in North America, will entail approximately 250 roles during fiscal year 2015.
“These decisions are very difficult, knowing they will affect a number of our valued employees, but we are confident they are necessary to help create a winning future for our employees, our customers and our shareholders,” Kirwan said.
The company estimates an annualized sales loss of approximately $300 million associated with the store closures. Additionally, the company estimates one-time costs primarily associated with these actions to be in the range of approximately $140 million to $160 million, of which about $55 million to $75 million is non-cash. These costs are expected to be recognized primarily in the second quarter of fiscal year 2015 and include lease buyouts, asset impairments primarily related to the Gap fleet, inventory and fabric write-offs, and employee related costs associated with organizational changes. The company estimates annualized savings from these actions to be approximately $25 million, beginning in 2016.
Gap Inc. is a retailer offering clothing, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Athleta, and Intermix brands. Fiscal year 2014 net sales were $16.4 billion. Gap Inc. products are available for purchase in more than 90 countries worldwide through about 3,300 company-operated stores, over 400 franchise stores, and e-commerce sites.