Today: San Francisco-based Gap announces that it will close about 175 of its namesake stores nationwide and lay off 250 office workers. Also: Microsoft, EA show off coming attractions at E3 video game conference.
The Lead: Gap to lay off 250 workers, close 175 stores
New Gap CEO Art Peck is paring down the San Francisco company”s namesake retail chain, announcing Monday that Gap will close down more than a quarter of its namesake stores and lay off at least 250 workers.
“Customers are rapidly changing how they shop today, and these moves will help get Gap back to where we know it deserves to be in the eyes of consumers,” Peck said in Monday”s announcement.
Gap will close 175 of its 675 Gap stores nationwide, with about 140 expected to occur in the current fiscal year; Gap”s 300 outlet stores will stay open, and a limited number of European locations will close, the company announced. After the reduction, Gap expects to have about 1,600 locations worldwide.
In addition to any employees let go as a result of the closures, Gap plans to lay off 250 office workers in “the brand”s headquarter workforce.” When asked for clarification, a Gap spokeswoman said that the layoffs would not all be occurring in the company”s San Francisco headquarters.
“The headquarter role eliminations are primarily in Gap”s North America offices, including places like New York and San Francisco, but also across its Upper Field Leadership, which are based across the country,” Liz Nunan wrote in an email.
Gap lists 141,000 workers, but the vast majority of those are employed at the company”s retail outlets. Nunan said Gap would not disclose how many store employees would be affected by the closures, and Gap did not announce the particular stores that are closing.
“These decisions are very difficult, knowing they will affect a number of our valued employees, but we are confident they are necessary to help create a winning future for our employees, our customers and our shareholders,” Jeff Kirwan, global president for the Gap brand, said in the announcement.
Gap is the fifth largest non-tech company in Silicon Valley in terms of sales, and the 13th largest company overall in the Bay Area. Revenues grew 1.8 percent to $16.44 billion for Gap in 2014, but profits fell 1.4 percent to $1.28 billion. Those results include sales at all Gap chains, including Banana Republic and Old Navy; net sales at Gap-branded stores declined 5 percent worldwide in 2014, including outlet stores.
Brian Sozzi, who analyzes the retail industry as CEO and chief equities analyst of Belus Capital Advisors, called the store reduction “disturbing” Monday.
“I am concerned on how Gap will address growing order online, ship from store demands with 100+ fewer stores,” Sozzi tweeted.
Peck — who previously led Gap”s online efforts — became CEO of the company at the beginning of its new fiscal year, on Feb. 1. He plans to meet with investors at the company”s San Francisco headquarters on Tuesday morning as part of a previously planned investors day, with Kirwan also scheduled to participate.
Gap stock fell 0.2 percent to $38.19 Monday, then gained more than 1 percent in late trading.
SV150 market report: E3 video game conference kicks off
Stocks dipped to start the week Monday as the video game industry”s biggest annual celebration kicked off in Los Angeles.
The Electronic Entertainment Expo, or E3, began Sunday night with a preview of two highly anticipated sequels, “Fallout 4” and a new “Doom” game. Larger companies dominated Monday”s early events: Microsoft announced that it would make many Xbox 360 games able to play on its newer console, the Xbox One, and showed off the ability to control “Minecraft” in an augmented reality environment with the company”s HoloLens device. Redwood City video game publisher Electronic Arts took the stage next to show off its coming “Star Wars” themed games, along with another “Plants vs. Zombies” sequel. EA fell 1.9 percent to $61.57 Monday while Microsoft declined 1.1 percent to $45.47.
Apple fell 0.2 percent to $126.92 while revealing the share of Apple Music proceeds that will be shared with labels and seeking editors to help with its forthcoming News service. Cisco fell 0.2 percent to $28.48 while making staffing changes in China, and Netflix fell 1.1 percent to $654.02 while facing a potential challenge in China from Alibaba. Facebook launched a new private photo-sharing offering while Belgium launched a lawsuit against the Menlo Park social network, and Facebook shares dropped 1 percent to $80.71. Twitter continued to be the subject of CEO speculation as shares dipped 3.5 percent to $34.66. As CEO Elon Musk launched a competition to help make his Hyperloop idea into reality, Tesla Motors fell 0.1 percent to $250.38.
Up: FireEye, SunPower, GoPro, Salesforce
Down: Twitter, Sandisk, HP, Pandora, EA, Zynga, Intuit, Oracle
The SV150 index of Silicon Valley”s largest tech companies: Down 7.16, or 0.4 percent, to 1,772.41
The tech-heavy Nasdaq composite index: Down 21.13, or 0.42 percent, to 5,029.97
The blue chip Dow Jones industrial average: Down 107.67, or 0.6 percent, to 17,791.17
And the widely watched Standard & Poor”s 500 index: Down 9.68, or 0.46 percent, to 2,084.43