In a bid to staunch the bleeding caused by yet another disastrous quarter of declining sales, Gap Inc. announced Monday that it plans to close 175 North American full-price stores over the next few years and cut corporate headcount by about 250.
“Customers are rapidly changing how they shop today, and these moves will get Gap to where we know it deserves to be in the eyes of consumers,” CEO Art Peck said, noting that a turnaround attempt has been his top priority since he took the title in February.
Of the 175 stores, 140 are expected to shutter this fiscal year, and the closures will not impact Gap Outlet or Gap Factory stores. The San Francisco-based company will also close “a limited number” of European stores.
Following the “fleet optimization effort,” Gap will have 500 specialty stores and 300 outlet locations in North America.
In addition to the employees laid off at those stores, Gap is slimming down its corporate workforce by about 250.
“These decisions were 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,” said Jeff Kirwan, global president, who joined the team in December.
The closures will cost the company roughly $300 million in lost sales, as well as one-time costs of between $140 million and $160 million from lease buyouts, inventory and fabric write-offs and employee-related costs associated with the changes. By the time the cuts are completed in 2016, Gap estimates annual savings of $25 million.
Kirwan added, “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.”