There are thousands of Gap stores nationwide. But in New York City, they’re becoming just a little bit tougher to find.
In Manhattan in recent months, Gap has closed smaller stores on Lexington Avenue at 74th Street, Third Avenue at 54th Street and Columbus Avenue at 76th Street, said John Brod, co-founder and principal of brokerage PBS Realty Advisors.
That’s hand-in-hand with a sales decline. In the past quarter, Gap’s total sales dropped 5 percent to $3.44 billion on a same-store sales decline of 9 percent. The dip comes on top of a 4 percent decrease in the same period last year.
Nationally, the Gap brand will open 40 new stores in 2006, according to real estate information posted on the company’s Web site. But with an anticipated 100 Gap brand stores shutting their doors, that amounts to 60 net closings nationwide.
Although a Gap spokesperson pointed out that “while we’re closing stores, the company is also opening them as well,” the numbers show a near 20 percent Gap store closeout since 2002.
In New York, the company’s focus is on maintaining larger stores, Brod noted. To be sure, the Gap’s three-level store in Herald Square still bustles with crowds. The Gap at Herald Square is, in fact, the top unit in the company’s chain of around 1,400 North American outlets, with analysts estimating sales of up to $100,000 daily.
Yet if the Herald Square location is the Gap’s shining star, other stores haven’t fared quite as well in an environment where rents along Manhattan’s major retail corridors reached nearly $330 a square foot this spring, up around 19 percent from the year before, according to a report by the Real Estate Board of New York.
While it pulls back from the city, Faith Hope Consolo, chairwoman of the retail sales and leasing division at Prudential Douglas Elliman, said that Gap may choose to concentrate on suburban areas given their strength in mall locations. But David Saunders of the Saunders Company, who has worked with the Gap for 25 years as a leasing broker in the New York metropolitan area, said there weren’t any new deals coming his way.
“The strategy is to renegotiate and close down when they think the price is above market,” Saunders said.
Gary Schwartzman, assistant managing director for the retail group at Grubb & Ellis’ New York office, said he recently participated in a closed-door Real Estate Board of New York meeting in which Gap officials discussed plans to terminate store leases.
“They expressed the fact that the changing scene in retail, with rents where they are now, will probably make it likely that they will not be acquiring and will be looking to dispose of locations as leases come up,” Schwartzman said. “They are generating prices per square foot that can’t support the kinds of rents that the locations presently have and many are on significant corners.”
Retail analysts say the problem with the Gap is that it is not connecting with younger consumers.
“The problem is not how to preserve stores that seem to be yielding a decent return,” said industry analyst Kurt Barnard of Barnard’s Retail Marketing Report, “but how to encourage a new generation to set foot in the Gap.
“The Gap’s consumer did not stand still,” Barnard added. “He got older and became exposed to a great many different media that trumpeted new fashion ideas and trends.”
Abercrombie & Fitch, J. Crew and H & M are but some of the retailers that surpassed the Gap in fashion marketing and trendsetting, he said.
While the Gap brand suffers, analysts say the parent company may overcome its fashion missteps if it can get back to basics. Also, the company isn’t made up of just Gap brand stores; in 2006 the company is projecting a net 40 new store openings nationally of its Old Navy line and 20 net new Banana Republic stores.
There are also those who see promise with Forth & Towne, an offshoot launched last year to cater to baby boomer women that will be expanding to San Francisco, Los Angeles, Houston, Atlanta, Seattle and San Jose from its already existing five store locations in Chicago and New York.