2015 RETROSPECTIVE: Gap Initiative Aims to Cut U.S. Stores, Increase Overseas Stores

Gap Inc.’s operations are impressive. The San Francisco–headquartered retailer says that its product is sold in 3,300 company-owned stores across the globe. In 2014, its net sales were $16.4 billion.

But this major player sought to change the way it did business in 2015 under a backdrop of sliding sales.

After the 2014 holiday season wrapped, same-store sales started to decline for Gap Inc. They perked up in March with an increase of 2 percent, but Gap Inc. reported single percentage-point declines in its same-store sales for most of the year.

In June, Gap announced a series of initiatives to boost the company’s performance. One of the initiatives was announcing its intention to close 175 specialty stores in North America during the next few years. However, the company will increase its real estate in China. It also intends to expand its athleisure Athleta brand in America. Gap Inc. also seeks to improve its product operating model. It hopes to deliver more on-trend product collections while improving the speed and flexibility of its supply chain.

Zumiez Inc. typically performs as one of the more nimble players at the mall. But after the first fiscal quarter of 2015, its same-store sales started declining. Toward the end of 2015, the market continued to be soft. In November—generally considered as an important start of the holiday retail season—the Washington state retailer reported a same-store slide of 13.8 percent.

In a statement, Rick Brooks, Zumiez’s chief executive officer, noted that he was confident in his business’ strategy for the long term. But the holiday market was tough.

“We’ve moved quickly to reduce expenses to protect profitability in the face of challenging sales trends, which helped us exceed our bottom-line guidance for the third quarter. With the fourth quarter off to a slow start combined with tougher sales comparisons ahead, we believe it’s prudent to maintain a cautious outlook for the remainder of fiscal 2015.”

Analysts have been discussing why Zumiez has had such a tough year. Jeff Harbaugh wrote that Zumiez had defined itself as an action-sports retailer at the mall. But the market—and its opportunities—might be growing outside of action sports.

“What does Zumiez do?” Harbaugh wrote in a Sept. 26 research note. “Do they stick to the action-sports focus and, in my judgment, limit their growth opportunities—hard for a public company—or do they dip a toe in this broader market, whatever it is, and risk some dilution of their market position?”