On Monday, Gap Inc. announced that it would shut down one-fourth of its specialty stores in North America over the next few years, including 140 this year. The move will potentially be affecting thousands of jobs, as the company Combat a steep decline in sales with a decline in sales as its namesake brand. The San Francisco-based company said that it has planned to cut 250 jobs at its headquarters.
As of now, the company has not revealed on the number of employees that would be laid off as a result of the stores disclosures. In January 31, Gap had around 141,000 full time and part time employees in around 3,700 franchise stores and company-owned worldwide. A stream of fashion has ensued in shoppers turning away from Gap to its fast fashion rivals such as, Inditex’s Zara, Forever 21, and H&M.
Mizuho Securities USA analyst Betty Chen said that management is trying to manage and control the exposure to the brand (Gap), until they can have some compelling product to boost top line and profitability. The announcement of store closures follows a management with an unexpected result at the retailer.
In May 2015, Gap CEO – Art Peck – who took rein as Chief business from Feb. said that the brand’s labels of women’s clothing had been a challenge from several sessions mainly due to fit issues and quality, also it was not trendy enough that customers were willing to buy such clothes.
In Feb, the company hired new VP of Gap’s product design and development team – Wendy Goldman – former Co-president at LBrands Inc’s Victoria secret. In December, the company appointed Jeff Kirwan as the Gap’s division’s global president.
Gap stated that it is expecting to close 175 of the 675 Gap’s specialty stores under the umbrella of Gap label over the next few years, with an annual sales loss of $300 million. The company is expecting to incur one-time costs of $140 million to $160 million in the one-fourth quarter of the year.