Gap Pulls Plug on New Concept - TheStreet

Gap Pulls Plug on New Concept

The struggling retailer says that Forth & Towne didn't have enough potential for a long-term investment.
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Gap

(GPS) - Get Report

said Monday that it will pull the plug on its 18-month-old Forth & Towne concept to focus on its struggling existing brands.

The San Francisco-based specialty retail giant said Forth & Towne, targeted to women over age 35, "was not demonstrating enough potential for an acceptable long-term return on investment." Gap currently has 19 Forth & Towne stores in 10 U.S. markets.

"Forth & Towne was a great test of a promising concept and an illustration of the innovative risks you need to take in our business," said Bob Fisher, Gap's chairman and interim president and CEO, in a statement. "We made the tough decision to close the brand and focus our efforts on stabilizing the existing businesses."

The move comes as the company's Gap and Old Navy chains struggle with a two-year sales slump while grappling to find the right mix of merchandise. The company's other concept, Banana Republic, has shown some sales improvement in recent months, but the ongoing troubles at Gap and Old Navy recently led to the departure of Gap CEO Paul Pressler.

Dana Telsey, CEO and chief research officer at Telsey Advisory Group, says that shuttering Forth & Towne was the right move.

"It's a very small piece of the business," she says. "As the company focuses on its core brands, eliminating small distractions are essential."

Gap expects about $40 million in expenses associated with the Forth & Towne closures, which are expected to be completed by the end of June.

The closure will affect about 550 employees, and Gap said it is looking at ways to "redeploy" employees to positions in its Gap, Banana Republic and Old Navy brands, where feasible.

Meanwhile, the executive changes at the company continue. On Friday, Gap said Michael Cape is joining the company as executive vice president of marketing for Old Navy. Cape, who previously worked for

J.C. Penney

(JCP) - Get Report

, replaces Susan Wayne, who left the company in December.

Aside from Pressler, the company also has recently parted ways with Gap brand president Cynthia Harriss and Gap head designer Charlotte Neuville.

Shares of Gap recently were down 14 cents to $19.67.