Gap To Close 175 Specialty Stores In North America As Part Of Strategic Measures

(RTTNews) - Apparel retailer Gap Inc (GPS) on Monday announced strategic actions to enhance the performance of Gap brand, following an evaluation of its business and operations.

Gap said it plans to right-size its specialty store fleet and streamline its headquarter workforce, primarily in North America. The company will close about 175 specialty stores in North America over the next few years, with about 140 closures occurring this fiscal year. Gap said the actions would drive productivity improvements and showcase the brand in the most successful locations.

Gap said the actions will not impact Gap Outlet and Gap Factory Stores. In parallel with these moves, the brand will also close a limited number of European stores during this period.

Following the fleet optimization effort, the brand will continue to serve North American customers through about 800 Gap stores; and globally would have about 1,600 company-operated and franchise locations.

Also, Gap said that to speed decision making and responsiveness, it has decided to align its organization in support of its new product operating model. This will result in the reduction of the brand's headquarter workforce, primarily in North America, by about 250 roles during fiscal year 2015.

The company estimates an annualized sales loss of about $300 million associated with the store closures. Additionally, the company estimates one-time costs primarily associated with these actions to be in the range of $140 million to $160 million, of which about $55 million to $75 million is non-cash. These costs are expected to be recognized primarily in the second quarter of fiscal year 2015.

The company estimates annualized savings from these actions to be about $25 million, beginning in 2016.

Excluding the estimated pre-tax costs of $140 million to $160 million referenced above, or about $0.21 to $0.24 per share, Gap is reaffirming its guidance for fiscal year 2015 to be in the range of $2.75 to $2.80 per share.

Analysts polled by Thomson Reuters currently expect Gap to report earnings of $2.77 per share for the year.

Gap shares gained about $0.10 or 0.26% at $38.30 in after-hours trade on the NYSE.