Gap to Focus on Outlets, International
Gap Inc. has restructured its real estate strategy and will turn most of its focus on opening outlets and international units in 2009.
As previously announced, the San Francisco–based operator of Gap, Old Navy and Banana Republic will shutter 100 stores in fiscal 2009.
During a recent conference call with Wall Street analysts, company officials outlined a new real estate strategy, with plans to open 50 stores this year, three-quarters of them in outlet locations or overseas.
“We’ve had to offer more value to our customers in order to get them inside our stores,” Chief Executive Glenn Murphy said.
Outlets, which offer significantly lower price points, are one way to address value, Murphy said.
He said the company’s brand recognition is strong overseas and investments will be made internationally.
Gap has a strong balance sheet with about $2 billion in cash and little debt, Murphy said.
While it sets out to open new stores, it is trying to lessen the impact of the closures by negotiating with landlords on exit strategies. In some cases, the company is upgrading locations of some units. One strategy is to downsize the square footage of certain Old Navy stores.
Murphy said the plan is to have concepts for each of its brands in place by the end of the third quarter. Two new Old Navy concepts are already being tested in California, he said.
He added that the company will also try to reduce its inventory per square foot, which is down 6 percent over last year.
“Traffic, the lack thereof, has been the Achilles' heel of our company for a number of years. We don’t want to be a company where [marketing decisions] are based on moving through inventory rather than driving traffic,” he said. “I’d like to think going forward that any investment we make in our gross margin is based on trying to drive in traffic and that we can let the stores and our product do the job of moving through inventory.” —Robert McAllister
