Gap will focus on Old Navy and Athleta, shutting 200 Gap and Banana Republic stores

Gap Inc. is shifting its focus to its growing brands Old Navy and Athleta and away from its Banana Republic and namesake Gap brands.

The company said Wednesday it will close about 200 Gap and Banana Republic stores in the next three years and open about 270 Old Navy and Athleta stores during the same period.

Lower-priced Old Navy has been a bright spot for the clothing retailer, posting rising revenue even as sales fell at the Gap and Banana Republic brands.

The San Francisco company said Old Navy is on track to surpass $10 billion in sales in the next few years. Athleta, which sells athletic clothing, is expected to exceed $1 billion in sales. The company expects to reap about $500 million in savings over the next three years by better taking advantage of its scale.

“We continue to move with the customer and meet them where they are,” Gap Chief Executive Art Peck told analysts Wednesday at a Goldman Sachs Global Annual Retailing conference that was streamed over the Internet.

These moves are the latest to reinvent the company and are being spearheaded by Peck, who took the helm in 2015. The company is facing the same problems as other fashion retailers, as shoppers buy less clothing in general and shop more at off-price chains or buy online when they do. That has resulted in sluggish traffic at the stores. But Gap Inc. also has long struggled with its own problems, mired in a sales slump as its clothes fail to stand out in an overcrowded landscape.

The company has been offering frequent discounts to get shoppers to buy. It's also been working hard to improve fit — a problem that has long bedeviled the retailer — and it has been trying to rework its fashions.

The company has been cutting the number of stores over the last decade or so. Since 2005, the chain has closed 650 stores and reduced its footprint by 5 million square feet, Peck said.

Peck told analysts that the company’s online and mobile business has seen the highest sales and profitability growth of the divisions. The company has also been expanding its online services to meet the demands of its customers, including an option that allows shoppers to reserve an item online and pick it up at a store. It's also testing a subscription service at its Baby Gap brand.

Shares of Gap jumped 7.4% to $25.82.

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UPDATES:

2:10 p.m.: This article was updated with Gap shares’ closing price.

10:40 a.m.: This article was updated with comments from Gap CEO Art Peck.

This article was originally published at 9:55 a.m.

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