Gap Soars to a New 52-week High After Announcing Store Closures

Wall Street seemed encouraged by apparel retailer Gap’s latest announcement as it sent shares of the stock flying to a new 52-week high of $21.65 in trading on Thursday.

Gap announced this week at an investor conference that it plans to close stores and focus on e-commerce and off-mall retail. Following the news, shares rose 14%.

The company said that it would shrink its store footprint by about 350 stores and switch to a business model that’s driven by e-commerce and off-mall locations.

Gap said that it was going to close numerous Gap and Banana Republic stores across North America over the next few years. The retailer revealed that by the end of fiscal year 2023, it expects to close roughly 30% of Gap and Banana Republic stores in North America and that about 80% of its revenue will come from e-commerce and off-mall locations.

It said about 75% of its North American closures will be completed by the end of fiscal year 2021.

Gap said it is re-evaluating its European business and could close stores there. These changes will help Gap Inc. to return to “profitable growth” next year, the company said.

Online sales and Gap’s activewear brand, Athleta have been doing well during the pandemic. Its online sales grew by 95% and it gained 3.5 million new customers in the second quarter ended Aug. 1. Athleta was the only brand within Gap to report an overall increase in sales.

Gap has been trying to revive its brand with face masks during the pandemic and a deal with rapper Kanye West. The company has also been turning some of its stores into online fulfillment centers.

In a press release this past summer, Gap said that this partnership brings the relationship between West and Gap full circle, as Kanye worked in a Gap store as a teen growing up in Chicago. Since then, West has become a disruptive force across music, footwear, fashion, architecture and more. This new partnership will introduce both the Gap and YEEZY brands to new audiences.

“We are excited to welcome Kanye back to the Gap family as a creative visionary, building on the aesthetic and success of his YEEZY brand and together defining a next-level retail partnership,” said Mark Breitbard, Global Head of Gap Brand.

Under West’s creative direction, the YEEZY design studio will develop the new line to deliver modern, elevated basics for men, women and kids at accessible price points, with the creative process just getting underway. Additionally, West’s design vision will extend to unique YEEZY Gap expressions in Gap stores and digital channels over time.

Shares of Gap have gained about gained 21% since the start of the year.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.