Updated to include analyst comments.
Gap released first-quarter and April sales Monday. The company reported sales in the first quarter fell 6% year over year to $3.44 billion, missing forecasts of $3.66 billion. Gap said it expects earnings in the quarter of 31 cents a share to 32 cents a share, well below analysts' forecasts of 44 cents. The company oddly left its full-year earnings guidance of $2.20 to $2.25 a share unchanged, but that will likely be lowered when it reports earnings on May 19.
Gap once again saw stunning sales declines in the quarter. Same-store sales at Gap fell 3% despite an overhaul of the look of the company's merchandise this spring. Same-store sales at Banana Republic and Old Navy declined 11% and 6%, respectively. Trends didn't improve in April, either. Same-store sales at Gap declined 4% in April, with respective drops of 7% and 10% at Banana Republic and Old Navy.
A badly missed quarter has Gap evaluating the size of its global store base.
The company said it is "identifying opportunities to streamline its operating model to be more efficient and flexible, while more fully exploiting its scale advantage." Gap added that it's evaluating its Banana Republic and Old Navy fleets, primarily outside of North America, in order to "sharpen its focus on geographies with the greatest potential."
"Our industry is evolving and we must transform at a faster pace, while focusing our energy on what matters most to our customers -- we are committed to better positioning the business to recapture market share in North America and to capitalizing on strategic international regions where there is a strong runway for growth," said Gap CEO Art Peck in a statement.
One prominent mall executive is likely unsurprised by Gap's decision to rethink the size of its vast store network.
"If you really ask me what the big issue is [in retail], it's that the country is over-retailed, and that is causing the most pain -- the reason why we are over-retailed is do you really need 800 Gap stores, I mean who needs 800 stores in the country?" said General Growth Properties CEO Sandeep Mathrani in an interview with TheStreet. When asked what the optimal size for a specialty retail concept should be, Mathrani adds, "If you ask me about H&M, my personal opinion is 500 to 600 stores, but if you ask me about an Abercrombie & Fitch, I would say about 250 to 300 stores.
According to Mathrani, most retailers need to downsize to the top 500 stores in their portfolio in order to be as productive as possible.
Mathrani views were echoed elsewhere on Tuesday.
"With a string of disappointing results prompting management to acknowledge the need to streamline its operating model, we remain concerned that at 3,275 stores, the Gap's businesses are simply too large in the new normal where physical distribution has become a liability and uniformity is no longer cool," said Nomura analyst Simeon Siegal in a new note to clients. Siegal added that he doesn't think Gap is done closing stores.
For its part, Gap has shuttered hundreds of stores following the Great Recession in the hopes of improving its bottom line amid weak sales.
According to data compiled by TheStreet, Gap has closed about 513 of its namesake stores in North America since 2009. Total square footage for the once popular apparel destination has declined from 11.5 million in 2009 to 9.1 million last year. The company ended 2015 with roughly 866 Gap brand stores in North America after it closed 128 locations and -- believe it or not -- opened 34 new locations despite continuing to struggle connecting with customers.
In June 2015, Gap detailed plans to close a total of 175 stores over the next few years. A Gap spokeswoman did not return a request by TheStreet for comment.