Gap plans Europe exit for 2021
The ongoing global pandemic is hastening the decline of US apparel giant Gap, which has been struggling on European markets in the last few years. The Gap group, owner of Gap, Banana Republic, Old Navy and Athleta, has announced in a press release it is envisaging closing down its directly operated branches in Europe, where it will try to maintain a presence with franchise partnerships.
The planned closure of Gap stores is likely to take place in Q2 2021, and will occur in countries where company-operated branches exist - in France, the UK, Italy and Ireland, for a total of 129 stores, of which 80 in the UK, according to a document published by the group in August. Also on the cards, the closure of Gap’s European distribution centre in Rugby, UK.
Gap is planning to change the way its retail business operates in Europe, turning to a franchise partnership model that would involve transferring elements of Gap's European business to interested third parties, in order to retain a market presence. Gap already operates some 400 franchised stores in 35 countries. However, given the ready-to-wear market’s current situation and the savage cuts prompted by spates of default-driven acquisitions, the question is whether any solid partner will genuinely be interested.
“To the teams that support our European business, I want to thank you for your understanding as we go through this process, and express my appreciation on behalf of the entire leadership team,” simply stated Mark Breitbart, global head of the Gap brand, when he informed the staff in a video conference on October 20.
In 2019, Gap introduced a global store-closure plan that was set to affect 230 stores. In France for example, this led to the closure of eight shops with a loss of 250 jobs in 2019. There now remain 19 Gap stores in France, of which 10 in Paris, with nearly 500 employees working for Gap’s French subsidiary, according to Le Monde. In summer 2020, Gap announced a further streamlining operation, with 225 closures planned globally for 2021. The brand’s possible exit from Europe is part of this strategy.
The San Francisco-based Gap group has borrowed $500 million to deal with the current crisis. Its global sales lost 18% in Q2 of the current financial year, which closed at the end of August. Store sales slumped heavily, losing 48%, while e-tail revenue increased by 95% in the same period. In Europe, Gap sales lost nearly 50% in the course of a year, dropping from $131 million in Q2 2019 to $70 million in Q2 2020.
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