Some 130 Gap stores are expected to close during its current financial year – part of the 230 already expected to close over the next two years – the brand’s parent company Gap Inc said this week.
But the group will also open new stores for its Old Navy, Athleta and Gap China brands – meaning that there will be a net 30 store closures during this financial year, which runs to the end of next February.
The news came as the retailer, whose Gap brand is a Top250 retailer in IRUK Top500 research, said it was “not at all satisfied” with first quarter results, which came at a “challenging” time.
Back in February, Gap Inc announced plans to divide the business into two: one of the two parts will be Old Navy while the second part will include the Gap, Banana Republic, Athleta, Intermix and Hill City brands. At the same time Gap Inc said, in fourth quarter results, that it would close 230 stores over the coming two years. This week’s results show that most of those closures will come during this year, although the majority of the 130 closures scheduled for this year are expected to take place in the fourth quarter.
This week, Art Peck, president and chief executive of Gap Inc, said: “This quarter was extremely challenging and we are not at all satisfied with our results. We are committed to improving our execution and performance this year. We remain confident in our plan to separate into two independently traded public companies in 2020 and we are focused on setting up both companies for long-term value creation and profitable growth.”
The fashion retailer said that net sales came in at $3.7bn (£2.9m) in the quarter to May 4. That’s 4% down compared to the same time last year – when they were up by 1%. Gross profits of $1.34bn (£1.06bn) were down by 6% on last time as gross margins of 36.3% fell by 140 basis points on last year.
Global sales of the core Gap brand were down by 10% in the quarter. At this time last year they were down by 4%. Worldwide sales fell at its Old Navy (-1% Q1 2019/-3% Q1 2018) and Banana Republic brands (-3% 2019/+3% 2018) as well.
The company said that its sales figures were hit in part by the weakness of foreign currencies. But it also had more unsold stock – with merchandise inventory put at $2.24bn (£1.8bn) at the end of the first quarter, 10% up on the same time last year. That was affected by the acquisition of the Janie and Jack brand, by increases in the time that stock spent in transit, and as the number of stores that the company operated grew. By the end of the first quarter, Gap Inc operated 3,849 stores in 44 countries – of which 3,335 were directly operated by Gap. Ecommerce means that the retailer sells to 90 markets altogether.
Image: Screenshot from Gap.co.uk/InternetRetailing Media