Retail

Does Gap Need to Close More Stores?

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It has been a season of retail store closings. Macy’s Inc. (NYSE: M) has shuttered locations, beaten-up Sears Holdings Corp. (NASDAQ: SHLD) will close more, and Kohl’s Corp. (NYSE: KSS) announced 18 locations too. Gap Inc. (NYSE: GPS) has been closing stores for several years. Based on its recent earnings, the process should not be over.

Gap announced that in the 13 weeks that ended January 30, revenue was $4.38 billion, down from $4.71 billion the year before. Net income fell to $214 million from $319 million over the same period. In the quarter, comparable store sales dropped 7%, in contrast to a 2% increase in the same period of 2014.

The comparable store sales were uneven. Gap Global’s fell 6%. Old Navy Global’s were flat. Banana Republic Global’s fell 10%. The bulk of Banana Republic’s stores are in North America, where the store count dropped by six locations to 612. At the rate of the unit’s sales decline, Gap management will need to consider culling stores in 2016 as the trend continues.

Like all other retailers, Gap needs to get more of its revenue online, which should have a cost advantage over brick-and-mortar locations. Banana Republic needs to get there more rapidly.

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