Closing the Gap: Retailer Will Shutter 1-in-4 Stores in New York City

Falling out of New York. (Getty)

For decades, the Gap represented the sort of blasé casualness most Americans brought to their fashion. From men’s closets stuffed with baggy khaki cargos to high school girls repurposing those iconic navy-and-white shopping bags as backpacks, the Gap was America’s premier clothier. Even in fashion-forward New York, the company managed to open a few dozen stores.

Now, with changing tastes and intense competition from cheap-chic rivals like H&M and Uniqlo, the world’s second largest clothing retailer plans to shutter roughly a quarter of its stores in New York City. According to a real estate executive with knowledge of the plans, between 12 and 15 stores will close in the next few years, a consolidation that will greatly reduce the 35 Gap stores and 17 Banana Republics in the five boroughs.

Update: The Gap calls store closures “extremely exaggerated” >>

It is not simply the out-of-the-way mall outlets that will be disappearinga—which, let’s be honest, is the clothier home turf—but many of its more marquee properties, including a number of spots in Manhattan. “They are very much looking at the high streets,’ the executive said.

The Gap has been working on a consolidation plan over the past five years under C.E.O. Glenn Murphy, with a particular focus on combining its far-flung Gap Body, Gap Kids, Gap Women and other niche stores into larger Gap-branded boxes, where it typically could do the same volume with less overhead. This sort of downsizing has been taking place in New York, as well, but that had been on a one or two store basis, not on the scale currently being undertaken. Exactly which stores will be closed is still being determined.

The Gap did not respond to requests for comment.

Even with shoppers—and especially foreign ones taken with American brands—still flooding Manhattan sidewalks, Stifel Nicolaus retail analyst Richard Jaffe said the strategy, if properly executed, could make sense. “Some of these stores have a very high return on capital,” Mr. Jaffe said, owing to exorbitant Manhattan rents. “But they also have a high reward factor, because this is Manhattan, it’s visible and it’s prestigious. You don’t want to eliminate all these stores, but you do want to rebalance the portfolio while keeping some high-reward locations.”

“Are they closing Fifth Avenue?” Mr. Jaffe continued. “That would surprise me. Do they need a difficult-shaped store in the 80s on the West Side? Maybe not.”

The rise of e-commerce also provides another reason for consolidation, as a robust online market offers consumers instant gratification while limiting the company’s overhead. “They don’t need to be in every mall anymore,” Mr. Jaffe said, “just the best malls.”

And that is partly how the Gap got into its current predicament in the first place, as the company  overextended itself when times were fat in the 1990s and everyone was eager to fall into the Gap, as it were. Now, faced with a difficult economy, the retailer is falling back into a more natural position.

“The Gap had their day,” the real estate executive said. “Are they going away? No. But they need to make room for all the new players.” Closing the Gap: Retailer Will Shutter 1-in-4 Stores in New York City