It’s safe to say that in 2015, khaki is not the new black.
Gap Inc. (NYSE:GPS) will be closing about 175 stores in North America in the next few years, the iconic clothing chain announced June 15, with about 140 of those closures taking place this fiscal year.
There is no word yet as to how many of the 90 Canadian Gap stores will be affected or how many employees face layoffs.
“Returning Gap brand to growth has been the top priority since my appointment four months ago – and Jeff [Kirwin, Gap’s global president] 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.”
The number of stores being closed represents about 18% of the company’s total store listings in North America. After all 175 stores are shuttered, the chain will be left with about 800 Gap stores, which include 300 outlet stores. Globally, the retailer will still have about 1,600 stores in more than 50 countries.
The company is also cutting 250 positions at its San Francisco head office.
The move is expected to cost the chain about US$300 million in annual sales and after the changes are finalized, the company expects annual savings of US$25 million, starting next year.
One-time costs associated with the closures will be around US$140-160 million, which will for the most part be recognized in 2015’s second quarter. These charges relate to employee-related costs, asset write-offs, lease buyouts and inventory and fabric write-offs.
Gap said in a press release that it wants to work toward “a clear, on-brand product aesthetic framework focused on optimistic and elevated American style.”
“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,” Kirwin said.
As of press time, shares of Gap Inc. were trading at US$38.71 – an increase of 1.34%.
Gap has not responded to a request for more information.
This news comes at a time where many retail chains in Canada are floundering and closing stores or pulling out altogether. Target Canada’s recent collapse, which was the biggest insolvency in Canadian retail history, is not the only example. Mexx, Jacob and Sony have also closed stores or gone bankrupt within the last year or so.
Meanwhile in Vancouver, the face of retail is changing in a different way as higher-end chains such as Simons, Nordstrom, Moncler and Versace are making their moves into the city.
