Gap May Close Hundreds Of Stores

By Douglas A. McIntyre Updated Jan 11, 2:38PM EST · Published Nov 21, 6:35AM EST

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Gap May Close Hundreds Of Stores — © Raysonho @ Open Grid Scheduler / Grid Engine / Wikimedia Commons

Gap Inc. (NYSE GPS) announced its third-quarter earnings. The numbers were not encouraging, nor was the company’s forecast. Results from Gap, one of the company’s three major brands along with Banana Republic and Old Navy, were particularly troubling. In the wake of reporting the numbers, Gap’s CEO said he was looking at the future of hundreds of stores, some of which he may close. The Gap brand launched the company in 1969

While total company sales rose in the quarterly period which ended November 3 from $3.8 billion last year to $4.1 billion this year, net income barely budged. Net for the third quarter of last year was $229 million which rose to $266 million. The Old Navy brand is the company’s flagship in terms of growth. Same-store sales for the brand were up 4%. Gap Global brand same-store sales fell 7%. Banana Republic same-store sales were up 2%.

On a brand basis in the quarter, Old Navy revenue was $1.95 billion, up from $1.76 billion. Gap Global revenue fell from $1.32 billion to $1.28 billion. Banana Republic revenue rose to $601 million from $557 million.

As Gap announced the earnings, Art Peck, president, and chief executive officer was not pleased with the Gap brand performance. He said “We are clearly not satisfied with the performance of Gap brand. We know this iconic brand is important to customers, and we are committed to taking the bold and necessary steps to ensure that it delivers value to shareholders.”

Peck left the worst news to the company’s conference call held after earnings. He said”…there are hundreds of other stores that likely don’t fit our vision for the future of Gap brand specialty store, whether in terms of profitability, customer experience, traffic trends, importantly, the rod structure, and/or near- and long-term relevance to the brand. These stores are a drag on the health and a drag on the performance of the brand.” He added, “There likely will be a cash cost to exit many of these stores, which we will attempt to minimize with appropriate sequencing, but I plan to exit those that do not fit the future vision quickly.”

Gap has closed hundreds of stores in the past as the company’s original flagship brand has faded. In 2017, Gap said it would close 200 Gap and Banana Republic stores. In 2015, it announced it would close 175 stores

The CEO of Gap Inc. believes his future is based on fewer Gap stores. That means more will almost certainly disappear soon.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.