Gap to close 21% of North American stores

The apparel retailer will shutter 189 stores by the end of 2013. While profits at home are getting squeezed, the company sees better opportunities abroad, especially in China.

By Charley Blaine Oct 13, 2011 7:29PM
Go to any mall in a decent-sized city, and you'll find a Gap store, maybe a Banana Republic or Old Navy.

Well, maybe you won't. Gap (GPS) said Thursday it plans to cut its North American store count from 889 to 700 by the end of 2013, a decline of 21.3%. From the end of 2007, it represents a 34% decline in store count.

The company said it is not going under. "We are focusing on a smaller and healthier fleet in North America," Chief Financial Officer Sabrina Simmons told a New York investment conference Thursday. It does $14 billion to $15 billion a year in sales.

Gap is expanding outside the United States and wants to generate 30% of revenue by the end of its 2013 fiscal year. It expects to triple its store count in China to 45 from 15 now. Its first Banana Republic will open in Paris later this year.

The North American market isn't delivering the sales growth Gap wants. So, it's looking elsewhere for growth. The savings from operating fewer stores should help finance the overseas business. Gap Inc.

At least that's the hope. Wall Street wasn't too excited. Shares closed up 0.4% to $17.92. But they're down 24.5% from their April high.

Gap's problem is that it is, well, middle-brow, as The Wall Street Journal noted Thursday. (Registration may be required.) If you like khakis and nice but not spectacular duds, Gap and its sister stores are for you. The problem is that you can get those clothes cheaper elsewhere, and, if you want something with glamour, there's Macy's (M) or Nordstrom (JWN).

So, its North American business has struggled. September same-store sales were down 4% from a year ago. The flagship Gap stores saw sales drop 4% from a year ago. Old Navy and Banana Republic sales were off 1% each. Sales in September 2010 were flat to up 1% from 2009.

International sales were off 13%, compared with a year ago's gain of 4%.

In the second quarter, its gross profit margin had shrunk to 9.9% from 12.8%. Smarter store operations and a big cut in the cost of cotton should help matters. Cotton is down 30% from a year ago.

This spring, the Journal said, Gap parted ways with the top designer for its Gap clothes. CEO Glenn Murphy conceded the store's offerings had become dull.

If you're a Gap aficionado, the closings won't be the end of the world.

If you're a mall operator, it's a different story. Gap has been closing stores for three years. Cutting 189 stores between now and 2013 means putting more than 1 million square feet of space on the market nationally at a time when malls are struggling.
Oct 14, 2011 8:23AM
More American jobs going to China when will someone wake up ? Chinese are going to take over this country without firing a shot. But we keep throwing away billions of dollars in the Middle East. Step back this Nov. and check out the people running for office we are the ones to make a difference. God help us. 
Oct 14, 2011 3:27AM

Just a sign of the times...

More Americans are shopping at places like

the Goodwill and Salvation Army stores......

Oct 14, 2011 2:58PM
Oct 14, 2011 3:24AM

Just what we need another company that is more worried about profit, than the country.  What ever happened to Made in Americia????

Oct 14, 2011 7:50AM
If people will pay $10 - $30 more for an article of clothing, companies will make their articles in the U.S., but most shoppers will not.  The only way to buy cheaper clothes is to outsource their production. If people are willing to pay $5.00 for a head of lettuce, then American workers can work to harvest crops, but no one wants to pay that amount of cash for food products, so illegal aliens do the job, and prices remain relatively low for fresh produce.  And if people who are hard-up and out of work and need some cash, why not swallow their pride and get to work in the fields. Some sort of income is better than nothing.  Ask the farmers, they are worried, and many ripened crops are rotting in the fields.
Oct 14, 2011 5:01PM
DexterGreen< you are so right. I could say alot, but, will be circumspect.! This economy today scares the heck out of me.  I live in the South, I know first hand of the scarcity of labor and crops rotting in the fields. We bitch about the illegals, but at the same time, without them food prices soar.  I may be "out-there", but why not let them work and TAX them. So many  of us think that hard work with minimum pay is "beneath" us,or some minor ailment entiltles to be supported by the government.  I know,probably not a poplular stance, but I stand by it!.                                                                        
Oct 14, 2011 7:49AM

Places that sell Crap clothes at 5 Times what they are worth ... close em all ....

Oct 14, 2011 4:59PM
I worked at Gap and Banana Republic, and I can say that Gap's head was so far up its **** that it was only a matter of time before they met with a reality check.  As noted by others, the quality is not what it used to be and hasn't been for over 10 years, yet their prices haven't taken much (if any) of a dive.  Life lesson: never assume you are infallible, or else failure will be inevitable.
Oct 14, 2011 3:57PM
You know like many people who have expressed their comments it feels like a betrayal putting so many americans out of work, on the other hand, I did not know so many people like myself felt like their clothes cost to much. Well Gap I was impressed with you in the 80's, loyal in the 90's and now do not care to pay for your high prices. You never needed my business anyhow...Broken heart
Oct 14, 2011 12:17AM
They did almost 15 billion in sales and made a billion bucks last year. They return almost 30% on equity. I'd say the real gap is between the ears of most of the posters on this thread.
Oct 13, 2011 11:42PM
Oct 14, 2011 4:47PM
I used to work at the Gap when I was a high schooler, and would buy the clothes because I got a 50% discount. I haven't purchased Gap clothing since then(10 years ago). The quality has gone down hill, while prices have gone up. I have been shopping at local thrift stores and can find name brand jeans and clothing items such as Gap for $2 or so. Most are hardly worn, and some still with tags. Just goes to show how much money some people have to waste...donating clothes with tags.
Oct 14, 2011 6:32AM
Wonder where the clothes they sell in China will be made?  Oh - any place with a poorer & cheaper labor source than where they are selling thier wares.....
Oct 14, 2011 3:18PM

CorpAmerica giving up on real America. Gotta love that "corporate citizenship!"

Oct 15, 2011 9:28AM

WOW, this looks like some major GAP Bashing. 90% of my closet is from the GAP. Over priced? Dress pants for $40 is overpriced? The sales rack is amazing and the person who complained about the shipping cost clearly only shops Walmart’s .98 cent shipping rack. Mail does not just *poof* appear in your mail box IT COST MONEY TO GET IT THERE!  If you don’t shop there and/or have never walked into one of their stores who are you to say its crap? Who are you to say it needs to go out of business altogether? Who are you to say adding ONE LESS place for the unemployed to work is the best news of the day? With all the money that gap has raised for charity and project RED, it’s a little surprising that so many people who “DON’T WEAR THEIR “CRAP” HAS SUCH NEGATIVE THINGS TO SAY.   

Oct 15, 2011 12:07AM
I am not surprised at all .  I grew up shopping at the gap only to watch in the past 10 years that all the clothing looks like mens clothing, dull boring colors, nothing feminine at all, I mean come on, get rid of the buyer that just has to be a guy, a gay guy with really bad taste.  I am disgusted and have tried to be loyal to the gap, I keep checking the stores only to walk around and not be able to find anything that I would wear.  Someone is really misguided on this store, WAKE UP GAP, your stores are unattractive , store windows are zzzzzz, your product is YUCK. My teenage daughter laughed and said "Mom the only person who would wear this stuff is that talk show host lady Ellen DeGeneres..."  I cracked up and said, "your right".  NOTHING IS FEMININE at all at the gap for women.......THEY Lost this customer, I would rather shop at JCrew at least they have some feminine stuff. 
Oct 13, 2011 10:39PM
What are they waiting on, they ought to close the other 79%Angel
Oct 13, 2011 11:06PM
Gap closed the store in Bal Harbour, FL over three years ago......which makes perfect sense given that Bal Harbour is a luxurycentric mall with Saks & Neiman Marcus as its anchor stores no wonder they pulled out when they did
Oct 15, 2011 11:42AM
There's no focus when you "fall into the gap" anymore .  It's  looks a high priced thrift store! Also try to find someone to answer a question  you might have concerning a gap item.
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