Between the loss of its creative director Rebekka Bay, slumping sales, and a handful of failed brand reinventions, it's no secret that the past couple of years have been extremely rocky ones for Gap. This week brings more unfortunate news for Gap Inc., which announced late yesterday in a press release that it plans to shutter 175 of its Gap brand stores. These closures will affect only the namesake shops — not the outlets or specialty locations — and will occur mostly in North America, with 140 closures expected for this year.
The drastic move was an order under Gap’s new CEO Art Peck, who said that he prioritizes growth for the struggling brand over everything else. “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,” he said in the release. It's an attempt to streamline the operations and make the brand more nimble — which means cutting costs. Although Gap didn't say whether workers in soon-to-be-shuttered stores would be fired, the company stated that it plans to lay off 250 employees at its headquarters in New York and San Francisco.
According to Gap Inc., these changes will save the company about $25 million a year. Although it will suffer about $140 million to $160 million in charges related to the moves, Peck admitted that these layoffs and closures are a necessary move to make Gap more competitive in the retail landscape. In many ways, this is a last resort to try to get sales back on track. Despite revamping its ad campaign strategy, recruiting high-profile celebrity endorsements, and even shaking up its merchandise, the brand has failed to keep customers in today's crowded retail market. Gap Inc.'s changes won't affect its other brands, such as Banana Republic and Old Navy. But, it wouldn't surprise us if Gap looks to the thriving sales of Old Navy as a new kind model for success.
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