In Gap Inc.’s 2020 Investor Meeting on Oct. 22, the company announced that it would close about 30% of its North American Gap and Banana Republic stores by the end of fiscal year 2023 in favor of shifting the brand towards e-commerce and off-mall locations.
Founded in California in 1969, Gap has become one of the biggest United States apparel retailers. It has locations worldwide and its subsidiaries include Banana Republic, Athleta, Old Navy, Intermix, etc.
Similar to many other apparel stores and big name retailers like Century 21 and Victoria’s Secret, Gap Inc. has been struggling to cope with the effects of the coronavirus pandemic on retail, especially retail stores. Gap. Inc plans for the shift to e-commerce will “bring in about 80% of revenue,” according to CNBC.
With the company focusing on building its e-commerce presence, it has confidence that closing the locations will be the right decision. “As a result of this work, our mall-based exposure will decline meaningfully,” Gap Inc. Chief Financial Officer Katrina O’Connell said.
Shares for Gap Inc. hit a 52-week high following the announcement, when shares increased “nearly 14%,” CNBC reported. The company plans on closing Gap and Banana Republic stores over the next few years with about 870 locations remaining by the start of 2024, the The New York Times reported..
Since stores have had less foot traffic because of online orders and health concerns, retail has seen that “shopping habits have pivoted toward online versus in-store throughout the past few months,” Good Morning America said.
One Twitter user wrote, “Every big retailer will need to trim real estate,” in response to Gap Inc. posting that President and CEO of the Gap brand Mark Breitbard said the brand will focus on reducing its retail footprint “as part of restructuring the fleet of the future.”
In the investor presentation, Gap Inc. said that their strategy includes transforming the Gap, doubling Athleta and repositioning Banana Republic. During the pandemic, a majority of the company’s sales came from their activewear brand Athleta. In the second quarter that ended on Aug. 1, the company saw Athleta’s online sales grow by 95% and the brand gained millions of new customers.
Athleta is on track for a “speedy and significant growth,” Athleta CEO Mary Beth Laughton said, per CNBC. She also mentioned that the value of the brand has the potential to double to $2 billion by 2023. Old Navy also has the potential to grow in that time frame from being an $8 billion to a $10 billion brand.
However, the company also found another way to survive the pandemic, by finding alternative ways to generate profit such as making and selling face masks and signing a partnership with Kanye West to create a fashion line called “Yeezy Gap.”
The masks generated about $130 million in sales in the last quarter and the company expects they will return to profitable growth by next year.
Gap Inc. previously announced it would close 225 Gap and Banana Republic locations by the end of this year alone. “We’ve been overly reliant on low-productivity, high-rent stores,” Breitbard said, according to The New York Times.
