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GAP TO OPEN 175 STORES, CLOSE 135 OTHERS

BY BRANNON BOSWELL

Gap officials say the chain will shut underperforming namesake stores in favor of a rollout of new Old Navy and outlet stores in the face of flat same-store sales.

Last year San Francisco-based Gap opened 130 stores and closed 158. Of the 85 stores it closed in the fourth quarter alone, 69 were U.S. Gaps. The chain says it plans to open about 175 new stores this year, of which many will bear the Old Navy name, and to shut 135, many of them to be Gap units.

Closing the mostly mall-based Gap units and bringing out Old Navy and outlet stores will save on rent and other real-estate-related expenses, said CFO Byron Pollitt, speaking during the company’s fiscal year-end conference call in late February.

Gap says it will spend some $435 million on stores this year, with $225 million set aside for opening new stores, and $210 million earmarked for renovation and expansion of existing ones.

The chain will continue rolling out Gap and Old Navy maternity and plus sizes and Banana Republic petites to more stores, said CEO Paul Pressler. A similar apparel-size line (still unnamed) will hit two U.S. markets later this year, he added, and Banana Republic will open stores in Japan.

Gap celebrated its 35th anniversary last year, but it was a “little disappointing,” Pressler said. Full-year same-store sales companywide were unchanged last year, though they rose 7 percent in 2003. Net sales, meanwhile, increased 3 percent last year to $15.9 billion.

The international division proved to be the biggest drag, depressing same-store sales by 8 percent. Meantime, the Banana Republic division’s same-store sales were up 6 percent and Gap U.S. grew 2 percent, while Old Navy’s comps were flat.

Poor merchandising decisions caused the slump on the international side, Pressler said. “It reinforced the fact that merchandising decisions need to be made locally,” he said. The chain plans to open a New York City design office this year to ensure that apparel for Japanese and European stores is tailored appropriately to those markets, he added.

The holiday season was less than stellar too, Pressler said. Fourth-quarter same-store sales fell from the year-ago quarter at all divisions except Gap U.S., which was relatively unchanged. Gap International comps dropped 8 percent, Old Navy fell 4 percent, and Banana Republic slid 1 percent for the quarter ended Jan. 29. The quarter’s net sales companywide were the same as the previous year, while same-store sales were down 3 percent.

Gap will air a second series of ads featuring actress Sarah Jessica Parker, said Pressler. Parker starred in the chain’s fall and holiday campaigns.