Gap to Close 175 Stores and Trim 250 Jobs

6/16/2015
Gap Inc. is closing stores and reducing its headquarter workforce, primarily in North America.

"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," said Art Peck, Gap Inc. CEO. "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."

Gap will shutter about 175 specialty stores, excluding Gap Outlet and Gap Factory Stores, in North America over the next few years, with about 140 closures occurring this fiscal year. Gap also will close a limited number of European stores during this period.

Following the closures, Gap will operate about 800 specialty and outlet stores in addition to its e-commerce presence, better reflecting the way today's customers shop across specialty, outlet and online. The brand will continue to have a robust global presence in more than 50 countries and with about 1,600 company-operated and franchise locations globally.

"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," said Jeff Kirwan, global president for Gap.

Since Kirwan was appointed to lead Gap in December 2014, he's rebuilt the leadership team and worked to strengthen the brand and successfully compete on the global stage. The team is driving towards a clear, on-brand product aesthetic framework focused on optimistic and elevated American style, while also rebuilding the brand's product operating model to increase speed, predictability and responsiveness, and enable greater competitiveness.

To speed decision making and responsiveness, Kirwan also announced decisions meant to align Gap's organization in support of its new product operating model. This will result in the reduction of the brand's headquarter workforce, primarily in North America, by approximately 250 roles during fiscal year 2015.

Kirwan added, "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."

The company estimates an annualized sales loss of approximately $300 million associated with the store closures. Additionally, the company estimates one-time costs primarily associated with these actions to be in the range of approximately $140 million to $160 million, of which about $55 million to $75 million is non-cash. These costs are expected to be recognized primarily in the second quarter of fiscal year 2015 and include lease buyouts, asset impairments primarily related to the Gap fleet, inventory and fabric write-offs, and employee-related costs associated with organizational changes.

The company estimates annualized savings from these actions to be approximately $25 million, beginning in 2016.
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