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Gap to close 175 stores as Zara, H&M steal customers

Gap will close a quarter of its stores in North America over the next few years, a move that could affect thousands of jobs. A series of fashion misses has resulted in shoppers turning away from Gap to fast fashion rivals such as H&M, Inditex's Zara, and Forever 21.

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Jae C. Hong/AP/File
A shopper walks down the steps at a Gap store in Los Angeles. Gap Inc., which owns Gap, Old Navy and Banana Republic, said Monday, June 15, 2015, it will close about 140 Gap stores in North America in the fiscal year that ends Jan. 31.
  • By Ramkumar Iyer Reuters

Apparel retailer Gap Inc said it would close a quarter of Gap specialty stores in North America over the next few years, including 140 this year, potentially affecting thousands of jobs as the company struggles with a slump in sales at its namesake brand.

San Francisco-based Gap also said it would cut 250 jobs at its headquarters.

The company did not say how many employees would be laid off as a result of the store closures. As of Jan. 31,Gap had about 141,000 full- and part-time employees in about 3,700 company-owned and franchise stores worldwide.

A series of fashion misses has resulted in shoppers turning away from Gap to fast fashion rivals such as H&M, Inditex's Zara, and Forever 21.

"Management is trying to control the exposure to the Gap brand until they can have some compelling product to really (rejuvenate) the top line and profitability," Mizuho Securities USA analyst Betty Chen said, noting the company's "prudence" in trying to eliminate the store footprint.

The announcement of store closures follows a management shakeup at the retailer.

Gap Chief Executive Art Peck, who took over the reins in February, said last month that the label's women's clothing business had been a challenge for several seasons due to quality and fit issues and because it was not trendy enough.

Gap fired creative director Rebekka Bay in January, eliminating the position in the process. In February, the company hired Wendi Goldman, former co-president at L Brands Inc's Victoria Secret, as executive vice president of Gap's product design and development team.

Jeff Kirwan was named the Gap division's global president in December.

Gap said it expected to close 175 of the 675 specialty stores under the Gap label over the next few years, resulting in annual sales losses of about $300 million.

The company also said it expects to incur one-time costs of $140 million to $160 million, primarily in the current quarter.

Gap reported sales of $16.44 billion for the year ended Jan. 31.

After the closures, Gap will have 500 specialty Gap stores in North America, as well as 300 outlet stores. The company also said it plans to close some stores in Europe, but did not specify how many.

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