Gap closing 175 stores in its latest turnaround effort

June 15, 2015, 8:42 PM UTC
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Gap Inc (GPS) is closing 175 of its North American namesake stores as it looks to stop a long sales slide in its flagship brand.

It’s the retailer’s second large-scale store shuttering campaign this decade and represents a 25% cut in the number of Gap specialty stores it currently operates in Canada and the U.S.

The fashion retailer, which on Tuesday will lay out its turnaround plan in greater depth, will close 140 of those stores this year. It will also cut 250 jobs at its headquarters. A spokeswoman for the company declined to say how many people at the store level would lost their jobs.

The closings will cost Gap about $300 million in annual sales. Last year, the brand had revenue of just under $4 billion in North America.

“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 Gap CEO Art Peck, who a few years ago oversaw the shrinkinkg of the store fleet.

He was referring to Jeff Kirwan, whom he put in charge of the Gap brand’s turnaround in December, soon before star designer Rebecca Bay left following a string of disappointing sales results.

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When Peck was in charge of the brand in 2011, he called for the retailer to shrink its store fleet from 890 locations to 700.

In 2014, Gap’s comparable sales fell 5%, compared to a flat performance at sister chain Banana Republic, and a 5% jump at value chain Old Navy, the company’s biggest division. The Gap’s travails have persisted in 2015, with Peck suggesting on a conference call last month that efforts to renew the brand won’t pay off until the spring, months later than his original prediction that a turnaround could take hold in time for the holiday season.

Monday’s announced closings will leave the company with 500 Gap stores, as well as 300 Gap outlet stores.

Peck, who became CEO this winter, said in February that fixing Gap was his “No. 1 priority,” with a particular focus on improving its women’s wear division.