Gap swings axe on North American stores and headquarters staff

A “limited number” of shops in Europe will also shut as the retailer pursues “an aggressive agenda designed to strengthen the brand and successfully compete on the global stage”.

The decisions form part of a “comprehensive effort to deliver more consistent and compelling product collections and engage customers across all channels” under the new leadership of Art Peck and Jeff Kirwan.

Gap Inc chief executive Peck said: “Returning Gap brand to growth has been the top priority since my appointment four months ago and Jeff and his team bring a sense of urgency to this work.

“Customers are rapidly changing how they shop today, and these moves will help get Gap back to where we know it deserves to be in the eyes of consumers.”

The retailer said about 140 of the North American store closures will happen this financial year and are designed to help “drive productivity improvements and showcase the brand in the most successful locations”.

The closures will leave Gap with 800 North American shops, including 300 outlet branches, and its online business, which the retailer’s chiefs believe creates “the right balance” to meet contemporary shopping habits.

Global president Kirwan said: “These decisions are very difficult, knowing they will affect a number of our valued employees, but we are confident they are necessary to help create a winning future for our employees, our customers and our shareholders.

“We’re focused on offering consistent, on-brand product collections and enhancing the customer experience across all of our channels, including a smaller, more vibrant fleet of stores.”

Kirwan added that Gap’s range will also come under increasing scrutiny as the retailer bids to transform its fortunes.

He said: “We are identifying, by division and category, where we’ve got product that has served us well but is starting on a decline, and what we can do to rebalance that or start with new ideas and new trends.

“Category by category, division by division, we are looking at what is starting to trend externally and feeding that into our process very quickly through testing. If it tests well and we feel confident in some of the early results, then we’ll invest and move forward.  

“We’ve built in this continual process for introducing new trends and new categories as a way of getting out of some of our declining categories. We are confident we are going to unlock some value.”

Gap expects the shop closures to result in an annualised sales loss of approximately $300m (£192.3m). There will be one-off costs of between $140m and $160m (£89.8m and £102.6m).

The changes are anticipated to generate annualised savings of about $25m (£16m) starting in 2016.

Gap trades in 50 countries and has 1,600 branches, including franchised stores, worldwide.