Gap to Close 21% of North American Stores

AP

Gap Inc. said it plans to close about 21% of its North American Gap brand stores between now and the end of 2013, a huge retreat for the retailer and a looming headache for mall owners already beset with vacancies.

Gap plans to reduce its North American store count to 700 by year-end 2013, down from 889 now, excluding outlet stores.

It has been decreasing its North American store count over the past few years, but hadn't disclosed the exact percentage it would cut in the next two years until Thursday.

Gap continues to struggle with its domestic business in the U.S. Gap's profit fell 19% in its most recent quarter. In North America, sales at namesake and Banana Republic stores fell 3% and 2%, respectively, while Old Navy same-store sales were flat.

The brand is stuck in American retail's hollowed-out midsection, which consumers have been abandoning for years as they split their dollars between cheap basics and must-have luxury items. Gap's would-be turnaround has become a quagmire of sorts for Gap Inc. CEO Glenn Murphy, who has long preached the importance of speed to his executives, pushing to cut bureaucracy and get clothes to stores faster.

In May, Gap parted with the top designer for its Gap brand, who was unable to get consumers excited again about Gap's apparel. By the CEO's own admission earlier this year, the merchandise had become "dull." One key problem has been coming up with compelling fashions for women's shirts.

For its discount Old Navy chain, the company is downsizing its store sizes while keeping the number of the locations little changed.

At the same time, Gap is expanding in China.

The casual-apparel retailer expects to have roughly 45 stores in China by the end of fiscal 2012, and expects to double its franchise stores to about 400 by the end of fiscal 2014.

Gap, which is holding an investor meeting Thursday in New York City, said current stores in China are performing well. The company in August opened its third Gap store in Shanghai, bringing total stores in China at the time to six.