Gap to to close 175 stores, cut 250 HQ jobs in North America
In order to drive productivity improvements and showcase the brand in the most successful locations, Gap will close about 175 specialty stores in North America over the next few years, with about 140 closures occurring this fiscal year.
These changes will not impact Gap Outlet and Gap Factory Stores. In parallel with these moves, the brand will close a limited number of European stores during this period.
Following the fleet optimization effort, the brand will continue to serve North American customers through about 800 Gap stores – comprised of 500 Gap specialty locations and 300 Gap outlet stores – as well as its dynamic online channels, better reflecting the way today’s customers shop across specialty, outlet and online.
The brand will continue to have a robust global presence in more than 50 countries and with about 1,600 company-operated and franchise locations globally.
To align Gap’s organization in support of its new product operating model, there will be a reduction of the brand’s headquarter workforce, primarily in North America, by approximately 250 roles during fiscal year 2015.
The company estimates an annualized sales loss of approximately $300 million associated with the store closures. Additionally, the company estimates one-time costs primarily associated with these actions to be in the range of approximately $140 million to $160 million, of which about $55 million to $75 million is non-cash.
These costs are expected to be recognized primarily in the second quarter of fiscal year 2015 and include lease buyouts, asset impairments primarily related to the Gap fleet, inventory and fabric write-offs, and employee related costs associated with organizational changes.
The company estimates annualized savings from these actions to be approximately $25 million, beginning in 2016.
Excluding the estimated pre-tax costs of $140 million to $160 million referenced above, or approximately $0.21 to $0.24 per diluted share, the company is reaffirming its guidance for fiscal year 2015 to be in the range of $2.75 to $2.80.
This guidance is provided to enhance visibility into the company’s expectations regarding its ongoing business excluding the Gap brand optimization effort. â–