• Retail Dive

Gap to close 200 stores, expand Old Navy

Dive Brief:
  • Gap Inc. announced Wednesday a plan to close 200 underperforming Gap and Banana Republic stores over the next three years, according to a company release.

  • At the same time, the company plans to open 270 Old Navy and Athleta stores, which executives expect to generate $10 billion and $1 billion in net sales respectively in "the next few years," according to the release.

  • Gap also said it plans to make "continued significant investment" in fulfillment capacity, loyalty programs, personalization, omnichannel services, artificial intelligence and other data-driven efforts, all to boost a digital business that the company said has grown in the double digits. Gap expects store closures and other cost cuts to generate about $500 million in savings over the next three years.

Dive Insight:

Gap’s announcement continues a story long in the telling: the slow decline of Gap and Banana Republic stores and the ascent of Old Navy.

Despite recent relative improvements across the company, some analysts worry about Old Navy carrying the retailer’s overall business. GlobalData Retail Managing Director Neil Saunders said in an August note that he remains skeptical of the company’s ongoing progress, noting that Old Navy’s continued strength is masking underlying troubles at its other brands.

"Although we believe growth could soften at Old Navy as it starts to come up against tougher comparatives, we remain broadly confident about the brand," he said in an email to Retail Dive.

But outside of Old Navy and the company’s smaller Athleta brand, Gap and Banana Republic are not resonating with consumers, according to GlobalData Retail research. "We recognize that steps have been taken to improve Gap's ranges and make marketing more compelling," Saunders said. "However, the general impression is still that of a rather dull brand that relies on excessive discounting to sell bland merchandise. From our consumer data, it is clear that most shoppers have a similar perception. In essence, much more work is needed to revive the Gap brand."

New Banana Republic CEO Mark Breitbard, tapped to take over the position in March, should be given time to turn that struggling unit around, but Saunders said there’s been little progress so far: "[W]e see little progress to-date, with collections in stores still off-pitch and overpriced,” he said. "Ultimately, success comes down to having products people want and are prepared to pay for."

While Saunders is more confident about Gap than he was a year ago, he said he's still skeptical that executives have the proper strategies in place to revive the overall business.

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