Closing Stores Not The Gap's Solution

Executives from The Gap Inc. (San Francisco) told the investment community that the retailer would dramatically reduce store openings in 2002, but that closing stores is not the answer to their well-publicized problems.

“Simply closing stores is not a major short-term opportunity to improve the financial results of the company,” Gap cfo Heidi Kunz said at a conference hosted by Merrill Lynch. “Few of our stores operate on a cash-flow negative basis. We're constantly evaluating bottom-performing stores at the time their leases come up for renewal, and we think our store-closing plans for 2002 will be similar to the 92 stores we closed in 2001.”

She did say that the store would be reducing capital spending by $600 million in 2002 to focus on same-store performances. “We'll shut off the new-store pipeline,” she said, “and won't restart it until we have significant momentum in our current business base.”

She predicted that overall square-footage growth, which had been 16 percent in 2001, would be around 3 percent this year.

President and ceo Millard Drexler, acknowledging that this has been “a humbling year” for The Gap, said the company is “mostly about getting the product right and refocusing on The Gap point of view.”

Re-identifying and refocusing on the company's brands will be a major initiative. “The Gap's brand is 'classic, confident, clean style and a focus on quality,'” Drexler said. “We want to be famous for khakis again.”

For Old Navy, “the brand has become too narrowly focused,” he said. “Teens helped make Old Navy famous, but offering fun, fashion and value to the whole family is the brand's real strength.” Among other initiatives, the Old Navy stores will be simplified, easier to shop, with better, cleaner signage.

And Drexler said that Banana Republic would be “returning casual luxury to the brand. Quality fabrication is a point of difference for Banana.”