NEW YORK (TheStreet) -- With profit margins on T-shirts and jeans under siege from the proliferation of H&M and Forever 21 stores in America, mall staple Gap (GPS) has found a new way to meet profit objectives for this year.
More aggressively dismantle its mall retail empire to reduce costs.
On Monday, the struggling specialty apparel retailer announced it will close about 175 Gap brand stores in North America over the next few years. About 140 closures will occur this fiscal year, a majority likely coming in January following the end of the holiday season.
In the past two years, Gap North America has already shuttered roughly 106 stores. After its latest store closing campaign, which was not hinted at on the company's first-quarter earnings call on May 21, it will operate 800 Gap stores in the U.S. comprised of 500 Gap locations and 300 Gap outlet stores. That is a far cry from Gap's white t-shirt and khaki selling heyday in the early 2000s, when it operated over 1,400 stores in the U.S.
The store closures will cost Gap $300 million in sales and one-time outlays of $140 million to $160 million. Gap estimates annualized savings from these actions to be $25 million beginning in 2016.
"Returning Gap brand to growth has been the top priority since my appointment four months ago -- and Jeff Kirwin (Gap global president) and his team bring a sense of urgency to this work," said Art Peck, Gap's CEO, in a statement. "Customers are rapidly changing how they shop today, and these moves will help get Gap back to where we know it deserves to be in the eyes of consumers."