Will Gap’s Downsizing Work?

Gap Inc. Chairman and CEO Glenn Murphy yesterday told a New York City investor conference that his company is looking at combining concepts into single stores and reducing store count.

The retailer will accomplish this, in some cases, by putting an adult Gap, along with baby, body and kids concepts, under one roof creating a superstore.

Industry observers have said for years that Gap’s overexpansion, creating 40-million sf of space, has led to its four years of sales declines. Same-store sales in May, for example, fell by 14% year over year.

This strategy makes more sense to us right now, especially with a weakened economy, than opening up new concepts. Why not consolidate chains, especially if they are all branded on the Gap model in the first place?

We are curious to see how retail landlords react to this news. Could it hurt the many malls with multiple Gap concepts? And is this strategy enough to finally turn around sales at the chain?

3 Responses to “Will Gap’s Downsizing Work?”

  1. 1 TeenyTiny June 16, 2008 at 10:42 am

    Can’t believe that Gap’s CEO is the highest paid CEO in retail at $40 million on 2007. Unbelievable. This concept has had declining sales for years. HR needs to get a grip on CEO salaries. Since when is it capitalism to pay a CEO to try?

  2. 2 klemons June 16, 2008 at 5:31 pm

    I don’t see why the Gap has to have a seperate store for PJs and undergarments, just make it a “section” and the same with the other iterations. What the consumer wants is to walk into ONE place and find all that they need – no need for seperate entrances and fancy names. Everyone is simplifying right now and the Gap should do the same, especially if they aren’t profitable.

  3. 3 Nancy H June 18, 2008 at 12:01 pm

    It sounds like Gap’s “superstore” concept will take up more room than a traditional Gap store alone, so perhaps Gap will be consolidating three or four store in a mall into two spaces combined. I think malls will be willing to accommodate Gap rather than lose them as a client altogether.

    I think this will help Gap weather the storm for awhile, but I agree with TeenyTiny – they should get a handle on where they are wasting money within the organization, and salary “downsizing” at the top is a good place to start. Unfortunately, most execs tend to start at the bottom and reduce the number of lower-paid employees they have before they start cutting their own salaries.

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