Gap Inc. will close 75 Old Navy and Banana Republic stores outside North America as the struggling company looks to focus on regions where it sees it has the greatest potential for success.
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Gap said in a statement that Japan “remains an important market” though with the continued presence of its Gap and Banana Republic stores.
“Old Navy’s near-term growth ambitions will be anchored in North America, including its most recent debut of company-operated stores in Mexico, as well as China and its global franchise operations”, the company said in a statement.
The company said it expected these earnings per share and sales outcomes in its April sales report. Meanwhile, it estimated the moves would save about $275 million a year and improve its operating margin by almost 2 percentage points.
The announcement comes as Gap reported a 47 percent drop in first-quarter profit.
“As the pace of change across the apparel industry increases, now is the time to accelerate our transformation by scaling our product and operating capabilities across our global portfolio”, said Art Peck, Gap’s Chief Executive Officer. Shares are down 55.2% for the past year while the S&P 500 is down 4.1% for the same period. First-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.32 and $3.51 billion in revenues. And the company said Thursday it would not reaffirm its earnings guidance for the fiscal year. At Old Navy, the figure was down 6 percent. Net sales were down 6 percent at $3.44 billion.
Gap shares have dropped 30 per cent since the beginning of the year, while the Standard & Poor’s 500 index has stayed almost flat. The move followed a 7 percent decline in Gap’s same-store sales in April, showing the retailer is struggling to reverse its sales slump.
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Up to Thursday’s close of US$17.28, the stock had fallen about 30 per cent this year. This includes the preparation of derivative works of, or the incorporation of such content into other works.
