American clothing retailer Gap (NYSE: GPS) has recently announced that it will close a quarter of its shops across the United States and will lay off 250 staff members during this financial year in a gradual phase out operation from its headquarters. Specialty clothing stores are all facing a tough time even though the economy is showing signs of revival and Gap is not the first nor will be the last to buckle under pressure of squeezed margins.
How this move will help Gap?
After this cut, the firm will have 500 exclusive stores and 300 outlets selling multiple brand outfits and will help the brand tighten operations and improve bottom lines across stores. The closures are likely to cost Gap several thousand dollars during initial months as it moves their stockpile and merchandise to nearby branded stores and find a suitable place to store or display them. According to Gap’s estimates, the firm will be able to save around $25 million with the closure of these stores in 2016.
Though Gap is suffering as a single store brand in United States, it is doing fairly well in overseas locations like China, where within a short period of four years, sales have increased by $500 million and e-store sales have increased by approximately 60 percent between 2013 and 2014. According to GAP’s new CEO Art L Peck, this changing trend of customer preferences will keep retailers on their toes and cloth designers have to keep it in mind while designing clothes.
Other beleaguered stores facing tough times
J. Crew brand also has announced similar plans of slashing down 175 jobs and finding a replacement for its head of women’s design when its sales plunged by 10 percent in the last quarter across all same stores. Abercrombie and Fitch (NYSE: ANF) recently replaced its high profile CEO and stated that it will not hire personnel based on attractive appearance and will instead look at experience and past success record. Logo driven brands like American Eagle (NYSE: AEO) and Aeropostale (NYSE: ARO) are also abandoning them to remove premium prices and develop mass brands at affordable price.
Like these top clothing brands, others too have adopted a policy of developing a range of unbranded clothing, which can be sold to all. New fast fashion retailers like T.J. Maxx, H&M and others like discount stores Marshalls have brick and mortar stores and also online sales so buyers can purchase according to their convenience.