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Gap Sheds Dozens of European Stores to Focus on ‘Digital-First’ Growth

Gap Inc.’s turnaround Power Plan no longer has room for a brick-and-mortar presence in Europe.

The specialty apparel retailer is preparing to close all 81 of its company-operated Gap Specialty and Gap Outlet stores in the United Kingdom and Republic of Ireland starting at the end of August through the close of September. Gap did not confirm the number of jobs that would be lost.

As of May 1, the Gap brand had 116 company-operated stores across Europe, but the company had been undergoing a strategic review since late 2020 regarding the pull-back of its operations on the continent in an effort to become a leaner, more profitable organization.

The apparel giant will maintain its Gap online business throughout Europe, saying in a statement that its “e-commerce business continues to grow and we want to meet our customers where they are shopping.”

However, Gap Inc. indicated that while it is becoming a “digital-first” business, it is looking for a third-party partners to help drive the channel. During the strategic review process, Mark Breitbard, global head of the Gap brand, cited third-party players via franchise partnerships as a “strong and cost-effective” way to amplify the retailer’s presence in the region.

In June, the company already admitted it was shuttering 19 doors in the U.K. and Ireland, since the leases in those locations are set to expire this month. The U.K. and Ireland exits come after the pandemic ravaged physical retail in the markets—nearly 10,000 stores shuttered permanently throughout the extended Covid-19 lockdowns, with top traditional fashion players like Debenhams and Arcadia Group among many others going bankrupt.

This isn’t the first brick-and-mortar exit for Gap Inc. in the U.K. The retailer’s Banana Republic brand closed all eight stores in the country to close out 2016.

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During the review, Gap Inc. said it was mulling the closure of a distribution center in Rugby, England, but it appears the warehouse will stay put given the retailer’s dedication to online growth in the region.

“We are thoughtfully moving through the consultation process with our European team, and we will provide support and transition assistance for our colleagues as we look to wind down stores,” the company said.

Gap Inc. has different exit strategies for its two other European markets, France and Italy. The specialty apparel retailer says it has identified a potential new destination for its stores in France. The company is in negotiations with Hermione People and Brands, the retail branch of FIB Group, to take over Gap stores in France.

In Italy, Gap is in talks to potentially sell its stores to an unnamed partner, with the retailer saying it will share more information when it is available.

The company already has made its feelings known on how it wants to reposition its brand, focusing more on its successful Old Navy and Athleta brands. This pivot includes the opening of 30 to 40 Old Navy and 20 to 30 Athleta stores, and the closure of approximately 75 Gap and Banana Republic stores in North America.

In total, Gap Inc. planned to shutter 350 Gap and Banana Republic stores from fiscal 2020 to the end of fiscal 2023. Approximately 75 percent of these closures will be complete by the end of the 2021 fiscal year.

Thus far, Gap Inc. has seen signs of life in the wake of Power Plan 2023. The retailer raised its 2021 earnings and sales guidance after hitting $4 billion in first-quarter net sales. The company also now offers a line of exclusive Gap Home products in Walmart, giving the retailer a new wholesale outlet and category.

And the retailer may be prepping its biggest potential windfall yet, with the Yeezy x Gap collaboration with Kanye West recently dropping its first product. A report from Bloomberg citing UBS Group analysis indicated that the pairing could be worth as much as $970 million.