Gap Inc. announced it expects to shutter around 30% of Gap and Banana Republic stores in North America by the end of 2023. By then, the company said it plans to generate roughly 80% of total sales from non-mall shops and e-commerce.
The San Francisco-headquartered apparel retailer has been a ubiquitous figure at shopping malls around the United States for many years. It said it will close down 220 of its namesake Gap shops by early 2024.
Shares of Gap Inc. reached a 52-week peak of $21.65 on Thursday's session. Its stock, which settled $21.15, climbed nearly 14% after the retailer disclosed proposals to shutter around 350 branches globally.
Gap has a market value of almost $8 billion. Around 75% of closures in its North American business will be finalized by the end of next year.
The move, announced by Gap Global president Mark Breitbard during a webcast Thursday, comes as the U.S. apparel group and other clothing companies attempt to reorganize in the face of a global health crisis, which forced many non-essential businesses in the U.S. to temporarily close. As a result, consumers resorted to online shopping, which market observers say will be permanent.
According to Breitbard, the company is "shrinking North American specialty stores and leaving mall-based locations," Fortune quoted him as saying in the webcast. He said they are remodeling their business strategy and "pushing more of the business to digital and growing market share in key categories."
The move also comes as Gap, which was founded in 1969, experiences difficulties with out-of-fashion trends, which has pushed customers toward apparel brands such as H&M and Zara.
The pandemic has made Gap's miseries worse by trimming down revenue streams at brick-and-mortar locations around the world. "We have been overly dependent on low-productivity and high-rent shops," Breitbard emphasized.
In contrast, Gap's thriving brands - Old Navy, which produces 50% of retail revenues, and Athleta - are both proposing to open new branches. Mary Beth Laughton, Athleta chief executive officer, said the brand's value could double to $2 billion in two years. Old Navy, currently worth $8 billion, could be valued at $10 billion by 2023, Gap said.
