Gap will concentrate on expanding its Old Navy and Athleta units. These two brands continue to have strong sales and earnings momentum. They feel fresh and relevant; each offers a merchandise selection that appeals to today’s customer. Old Navy offers a fast fashion sensibility at affordable prices while Athleta is well-positioned in the popular athleisure segment.
The two divisions will be supported by an additional 270 stores this year. On the other hand the iconic Gap brand has experienced 16 quarters of declining sales. Banana Republic has not fared much better, recording 12 consecutive quarters of negative sales growth. In fact a corporate decline in earnings can be attributed in large part to weakening performance in these divisions.
The company plans to close some 200 Gap and Banana Republic stores in malls. Since 2005, Gap has closed 650 stores and reduced its square footage by five million sq. ft. This is true of the industry in the US. Once famous names like Radio Shack and Payless Shoes are disappearing slowly. Malls are struggling and the closing of well-known stores just makes their prospects more challenging. Traffic is already slower because millennials like to shop on the internet. There has also been a shift of more shopping to off-price chains.