Gap Inc. shifting focus—and store footprint—to two brands

Gap Inc. is shifting its emphasis to its two best-performing brands — and realigning its store portfolio to reflect its new emphasis.



The nation's largest specialty apparel retailer had decided that its future growth lies primarily in its lower-priced Old Navy and athleisure-positioned Athleta brands. As a result, it expects to close about 200 underperforming Gap and Banana Republic stores over the next three years. Banana Republic has been a particularly dismal spot for the retailer, with 10 straight quarters of same-store sales declines.



During the same time period, the company will add about 270 Old Navy and Athleta stores across its portfolio. Gap expects Old Navy to exceed $10 billion and Athleta to exceed $1 billion in net sales in the next few years, driven by growth in online and mobile channels, U.S. store expansion, and continued market share leadership in loyalty categories.



In addition, Gap Inc. will accelerate its online and mobile strategies during the next three years with a continued "significant" investment in such areas as direct fulfillment capacity, loyalty, personalization, omnichannel services, artificial intelligence and other data-driven customer experiences.



Gap expects to save about $500 million in expenses over the next three years by "better leveraging its size and scale, cross-brand synergies and streamlining operations and processes." It said it plans to reinvest part of the savings in its growth initiatives, "providing opportunity for margin expansion."



"Over the past two years, we’ve made significant progress evolving how we operate – starting with getting great product into the hands of our customers, more consistently and faster than ever before,” said Art Peck, president and CEO, Gap Inc. “With much of this foundation in place, we’re now shifting our focus to growth. We will leverage our iconic brands and significant scale to deliver growth by shifting to where our customers are shopping – online, value and active.”



Gap Inc. products are available for purchase in more than 90 countries worldwide through about 3,200 company-operated stores, about 450 franchise stores, and e-commerce sites.