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Wall Street Wants Gap to Close More Stores


Gap Inc. has not shut enough underperforming stores, according to Deutsche Bank analyst Paul Trussell.

The company announced plans last summer to close 175 of its namesake stores in North America, but has thus far failed to staunch falling sales, recently recording its 23rd month of declines.

Gap comparable store sales were down 3 percent in March, in addition to a 14 percent fall in comps at Banana Republic and a 6 percent decrease at Old Navy, which caused the company’s net sales to fall from last year’s $1.53 billion to $1.43 billion.

On Wednesday, Deutsche downgraded Gap’s stock to “sell” with a $21 price target, and Trussell warned clients that further defeats are on the way for the retailer.

“We believe market share losses, an aggressive promotional landscape, weak traffic trends and fashion mishaps should continue to be too much to bear,” he wrote, as reported by Fortune, noting that the company is currently “over-stored” with an unfavorable pricing position, compared with fast-fashion peers.

By the end of the year, Gap North America is projected to have about 828 stores, 525 or so of which will be full-price while the remainder will be outlets, but Trussell said that’s roughly 175 stores too many. He maintained the retailer would be in a much better position financially if it ended the year with about 375 regular stores.

If the company continues on its current path, however, Trussell said comps aren’t likely to improve until fiscal 2017 and it will continue to lose market share to e-commerce and other retailers.

Gap Inc. stock (GPS) was down 1.4% to $23.64 as of 11:55 a.m. EDT Thursday.