While a number of other retailers were celebrating a strong holiday season yesterday (Dec. 26), Gap Inc. confirmed some more bad news for the company.
On Jan. 20, Gap will close its three-story mega-store at 680 Fifth Ave. in New York.
Open for 20 years (paywall), the location was once Gap’s flagship in New York. (The current flagship opened in Times Square in 2017.) The company has not publicly stated its reason for deciding to close the Fifth Avenue store, first reported by the New York Post. We have reached out to Gap for comment and will update this story with any reply.
But the store sits on a particularly expensive stretch of real estate, at a time when many of Gap’s stores are not performing as the company would like. When Gap Inc. reported its latest quarterly results (pdf, p. 1) in November, it revealed that globally sales at Gap stores open at least a year had dropped 7%, a bad quarter even for Gap, which has had many recently. Gap Inc.’s other brands, Old Navy—the star of the portfolio—and Banana Republic, which has struggled at times in recent years, saw their sales grow in the same period.
On a Nov. 20 call with analysts, Art Peck, the CEO of Gap Inc., said the “bottom half” of its global fleet of 775 Gap stores was acting as a drag on the brand. He said there were hundreds of Gap stores that didn’t fit the company’s vision for the future of the brand, and added, “I plan to exit those that do not fit the future vision quickly.”
The cost of rent on New York’s Fifth Avenue store isn’t helping. According to real-estate services firm Cushman & Wakefield, the stretch of Fifth Avenue between 49th St. and 60th St.—Gap is on the corner of 54th St.—ranks as the second-most expensive retail street in the world. Until last year it was number one, but it was edged out in 2018 by Causeway Bay in Hong Kong.
Retail rents have actually dropped in New York recently, after rising three years ago to a level dubbed ”unsustainable” by the Real Estate Board of New York, as CNBC noted. But even so, a number of stores on Fifth Avenue are vacating their spaces, including Polo Ralph Lauren, which shut its doors in April 2017, as well as Lord & Taylor and Henri Bendel, both of which are planning to shutter their stores in 2019.
It’s still a desirable location, of course, for brands doing well enough to afford it. Under Armour says it’s moving ahead with plans (paywall) to open a New York flagship in the former home of toy store FAO Schwarz next year, despite some recent stumbles. And in November, Nike opened a six-level, 68,000-square-foot brand temple at 650 Fifth Avenue—right across the street from Cartier, and just steps from Gap.