Gap Inc wants to be a growth company again so it's shifting its focus to the bright spots in an otherwise challenged company.
The company said on Wednesday it would close about 200 Gap and Banana Republic stores, just the latest paring of what was once a sprawling retail footprint. But in a sign of its shifting priorities, the company will also open 270 Old Navy and Athleta stores to expand of the chains within the portfolio that are excelling.
Ahead of an investor update, Gap Inc said it expects Old Navy sales to hit $10 billion in the next few years and for Athleta, its fast growing activewear chain to hit $1 billion. Old Navy, which generates about 50% of company sales, hit $6 billion last fiscal year, making the sales target ambitious, while Athleta's financial results have never been broken out. Still, Old Navy, an off-mall retailer whose business had slowed in 2016, is posting strong results once again.
The shift seems a tacit acknowledgement of how hard it is proving to fix stalwart brands like The Gap and Banana Republic: Gap's comparable growth has not increased for 14 quarters, while Banana Republic has seen 10 straight quarters of declines, include a few double-digit drops, despite many changes to each brand's senior management and their processes. What's more, those drops were all the more discouraging given how many of its underperforming stores the company has closed in recent years.
"We're now shifting our focus to growth. We will leverage our iconic brands and significant scale to deliver growth by shifting to where our customers are shopping," said Gap Inc CEO Art Peck, ahead of a presentation at an industry conference.
Gap Inc has been striving to improve the quality, fit and look of its products, be speedier and nimble in supply chain and production to be able to jump on trends more quickly, something fast-fashion rivals like H&M and Zara have been better at. At the same time, The Gap and Banana Republic, like countless other apparel chains including Abercrombie & Fitch have struggled with declining shopper traffic and hundreds of malls as well as an overabundance of apparel options which has made clothing seem like a commodity for many shoppers.
Peck will update investors further on his turnaround plan, including the next steps in Gap Inc's e-commerce strategy late Wednesday morning.