GAP downsizes in home territory

GAP downsizes in home territory

Californian clothing brand GAP will cut down its distribution network with 175 closures in North America and a limited number of store closures in Europe as well. The group says it has to do this because of altered purchase habits.

175 North American stores will close

140 of the 175 planned store closures in North America will shut down this year: Gap Outlet and Gap Factory Stores will not be harmed in the process and not close any stores, which means only the parent brand will face closures.

 

There will also be some store closures in Europe, but there was no mention of how many. On a worldwide scale, 250 people will lose their job, with the majority at its North American main office.

 

Gap will have 500 Gap stores and 300 Gap Outlet stores in North America after the restructuring is finalized, while it will also have an online presence. Worldwide, Gap will have 1,800 stores, both franchise and its own stores, in 50 countries.

 

Gap lagged behind quickly

Gap will lose some 300 million dollars (267 million euro) in turnover because of these closures. Just last year, the entire Gap group (including brands like Banana Republic, Old Navy, Athleta and Intermix) managed a 16.4 billion dollars (14.60 billion euro).

 

The move will also cost 140 - 160 million dollars (125 - 142 million euro), with 55 - 75 million dollars (49 - 67 million euro) in write-offs and devaluations. A positive note is that the restructuring will help save 25 million dollars (22 million euro) on a yearly basis.

 

Over the past few months, Gap lost customers to competitors like Zara and H&M and during 2015's first quarter, it lost 10 % in like-for-like turnover. Closing down less profitable stores should help improve overall profitability, the company hopes.

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