US apparel brand Gap is to pare back its store presence in Europe with the potential closure of bricks and mortar stores across the continent and the possibility of transferring some of the business to third-parties.
In a statement yesterday (21 October), the company said it is looking to transform its business model through partnerships that grow and amplify Gap’s global reach. As such, it has begun a strategic review of options for the Gap business in Europe.
One of the options being explored is the possible closure of its company-operated Gap stores in the UK, France, Ireland, and Italy at the end of the second quarter in 2021. It is also reviewing the company’s warehouse and distribution model and its Gap and Banana Republic company-owned e-commerce operations in Europe. One consideration is the closure of Gap’s EU distribution centre in Rugby, UK.
“As we conduct the review, we will look at transferring elements of the business to interested third parties as part of a proposed partnership model expansion,” said Mark Breitbard, head of Gap brand global. “Franchise partnerships are a strong and cost-effective way to amplify the brand. Through franchise, Gap brand reaches customers in 35 countries with more than 400 stores and 14 e-commerce sites.
“We are committed to sharing more as we thoughtfully work through this process. While the work is tough, we have our eyes set on leveraging our brand power to deliver ‘modern American optimism’ to customers around the world.”
In June, the speciality retail group said it was using the coronavirus pandemic to right-size the business and build it for the future – acknowledging there was plenty of work needed at the Gap brand.
Areas of focus outlined for the brand included leveraging online growth, right-sizing resources with the 25% headcount reduction, new products and segments like Gap team, and new opportunities like its licensing deal with IMG.
In its second-quarter, Gap Inc saw online demand across its brands help lift comparable sales by 13%. Online net sales jumped 95%, but it wasn’t enough to offset Covid-19 related store closures, which pushed net sales down 18% to US$3.28bn.
The San Francisco-based company also swung to a second-quarter net loss of $62m, from a profit of $168m a year earlier. Gap brand net sales were down 28%.