Gap Woes Continue, Old Navy Leaves Japan

Shoppers in Japan will have to shop elsewhere.

Gap Inc is shuttering every one of its 53 Old Navy stores in Japan before the end of 2016.

The retailer is giving ground in the third largest economy in the world, to fashion brands from Japan such as Uniqlo and Muji.

I am obviously disappointed the company is discontinuing its operations in Japan, but view it as being a sign of a solid company acknowledging that its business is not delivering, changes are made and the company moves ahead, said Art Peck the CEO at Gap, when referring to the closures of Old Navy stores.

Gap is shuttering its stores in Japan and refocusing in its business in North America as well as China, the company stated on Thursday.

These closures showed that the market in Japan is proving to be very tough and one of the most competitive for international brands, as the Japanese consumer braces for tough economic times.

Japan has thus far been unsuccessful in breaking free of its cycle of growth and contraction, even despite over three years of government stimulus.

Shoppers in Japan, to save some money tend to purchase domestic brands like Uniqlo as they feel they are less expensive, rather than Old Navy or Gap, especially if there are not any outstanding differences when it comes to design and function, said an local analyst in Tokyo via the telephone.

The retailer, based in San Francisco still has over 170 of its Gap brand stores as well as 51 outlets of Banana Republic in Japan.

In one other sign it is having difficulties, Gap did not confirm its forecast for earnings for the year announcing that the climate for retail would need to improve to meet its previous target.

Peck is currently taking a number of drastic measures after a turnaround plan this spring did not materialize. The CEO, who took control of the company in 2015, has struggled with lower traffic in stores and problems with the product assortment of the company.

In addition, the business of Old Navy, which at one time was the group’s shining star, is now suffering from falling sales.

Gap will shut down 75 locations in an attempt to revamp its operations. The hope the group has is to save as much as $275 million per year from that move and to improve its operating margins 2%.

Gap shares plunged by 55% over the last year. the S&P 500 index on the other hand has fallen just 4.3% during the same period.