Gap Inc. will shut down its nine-store Hemisphere chain by the end of January, bringing to a close a money-losing experiment in upscale attire, company officials said Friday.
"We said this is an experiment and we would only expand it if it met the returns we require of any of our businesses," said Warren R. Hashagen, vice president and treasurer of the San Bruno, Calif.-based clothing chain. "It was not profitable."
Hashagen refused to disclose how much money the Hemisphere chain had lost in its short life. But closing the Hemisphere stores, he said, will allow Gap to route its resources back to its core businesses: Gap Stores, GapKids, Gap International and Banana Republic. Hemisphere's first three stores opened in August, 1987. The chain had outlets in pricey malls such as the South Coast Plaza in Costa Mesa and the Watertower in Chicago and offered casual wear for well-heeled women and men.
"In my view, both Banana Republic and Hemisphere were starting to target the same market, admittedly with a different product line," said Thomas Tashjian, retail trade analyst for Seidler Amdec Securities in Los Angeles. "Eventually they would have been borrowing from each other. . . . Hemisphere was an upscale, name-brand Gap."
Tashjian said Friday that Gap was wise to shut down the tiny Hemisphere chain before it lost any more money in a market that the company wasn't even sure it wanted to be in. Closing down early in the year will allow the company to liquidate Hemisphere's merchandise during the busy holiday shopping season.
News about Gap isn't all bad, however. Even though the troubled Banana Republic chain is not out of the woods yet, Hashagen said his company has signed leases to open 15 new Banana Republic outlets within the next year.
According to Tashjian, sales in Banana Republic stores open more than one year were up in September and "respectable against a very strong performance a year ago when the company was aggressively promoting."
Meanwhile, Gap has tightened overhead and upper management costs in the Banana Republic division, he said, and it should be profitable in 1990, for the first time in three years.