Gap Inc. said it will shutter roughly 75 Old Navy and Banana Republic stores overseas, as the struggling apparel retailer focuses on its North American market to revive its fortunes. Shares of the San Francisco-based company were up 4.2 percent in after hours trading on Thursday. The store closures include all its 53 Old Navy outlets in Japan and additional international locations, according to the company, after reporting dismal first-quarter sales of its top three brands.
"Old Navy's near-term growth ambitions will be anchored in North America, including its most recent debut of company-operated stores in Mexico, as well as China and its global franchise operations," the company said in a statement. The retailer had 1,029 Old Navy stores in North America and 69 in Asia, as of April 30. It also has 607 Banana Republic stores in North America and 61 in Asia and Europe.
The company has further that that it expects the store closures to result in annualized sales loss of about $250 million but help save $275 million on an annualized pretax basis.
Gap has struggled in the past few quarters as a series of fashion misses put off shoppers amid increasing competition from retailers such as H&M, Forever 21 and Inditex's Zara. Despite sluggish sales, the retailer, which also owns the Athleta and Intermix clothing brands, said it is not reaffirming its adjusted profit forecast of $2.20-$2.25 per share for 2016. The company said "that trends in the apparel retail environment would need to improve from the first quarter" for it to achieve full-year profit of $1.92 per share estimated by analysts.
While sales of the company's Banana Republic and Gap brands have been falling for some time now, recent declines at Old Navy - the sole bright spot in the past few quarters - pose a bigger headache for the 46-year old retailer.
Gap's net income fell 46.9 percent to $127 million, or 32 cents per share, for the first quarter ended April 30, in line in the average analyst estimate. Net sales were down 6 percent at $3.44 billion, the company had reported on May 9. Up to Thursday's close of $17.28, the stock had fallen about 30 percent this year.