It’s more bad news for American malls. Once a hub of shopping and social activity, malls have experienced a downturn in popularity as online commerce continues to grow. Small boutiques and large anchor stores (such as Sears) have shuttered their mall locations, and in some cases, their entire corporations. Homebound shoppers during this year’s pandemic have helped to accelerate the online-buying trend. Now Gap Inc. has announced that it is moving out of malls too.
The San Francisco-based retailer, which was for decades a fixture at shopping malls around the country, said Thursday that it will close 220 of its namesake Gap stores—or one-third of its store base—by early 2024. That will result in 80% of its remaining Gap stores being in off-mall locations. As part of its restructuring, Gap Inc. says it also plans to close 130 of its Banana Republic stores in North America in three years.
The announcement was made at a Gap Inc. investor meeting. The company says it will focus those two brands—Gap and Banana Republic—on outlets and e-commerce (online) business.
Mall complexes are not owned by the stores that operate in them. Large corporations (like Simon) operate those facilities, set hours and rules (such as whether or not teens are allowed onsite unaccompanied by parents), and charge rent for shop space.
Mark Breitbard, CEO of the Gap brand, says, “We’ve been overly reliant on low-productivity, high-rent stores.” That means the sales generated from regulated mall traffic aren’t great enough to offset the cost of renting space there.
But Gap Inc. isn’t pulling everything out of malls. The company says it plans to add more Old Navy and Athleta stores—which operate under the same corporate umbrella.
Why are those two brands still thriving in malls? It comes down to volume for one and profit margin for the other.
Old Navy thrives because it offers trendy clothes at low prices. By selling low, it moves high volume. People will make the trip to the mall to save money, it seems. Lots of sales—even if each sale is not very large—add up to make the rent worthwhile.
Athleta, on the other hand, offers a limited line of pricey activewear. The brand is considered “elite.” Each piece is costly enough to bring in significant profit toward that high mall rent.
But Gap and Banana Republic are mid-range retailers. Not too high, but not so low either. That makes it hard to generate enough sales to warrant the costly mall space.
Gap Inc. believes it is being financially responsible by removing its lower-producing segment from the mall setting. Now it’s up to the malls to decide how they will fill the literal gaps.
(A window display at a Gap Kids clothing store in Winter Park, Florida. AP Photo/John Raoux)