Some Gap stores reopen in Philadelphia as hundreds more prepare to go live soon

Five stores under Gap Inc., which include Athleta and Banana Republic, had reopened by Thursday in the Philadelphia area as the company prepared to resume operations at 800 of its stores across the country by the end of the month, a company spokesperson said.

The trickle of reopenings, which ranged from a Banana Republic on Philadelphia’s Walnut Street to a Gap in Doylestown, are part of the company’s plans that have followed similar sweeping measures by other major retailers. Bloomingdale’s, Macy’s, and Ulta have opened in other parts of the country but not yet in the Philadelphia area.

The reopenings, which come amid sagging apparel sales during the coronavirus pandemic, are expected to resuscitate — and reshape — Gap Inc.'s portfolio of stores, each of which had found varying levels of online success during the pandemic.

Athleta and Old Navy were its top performers — the latter surged ahead in total sales in early March— while the company’s namesake, Gap, has long languished, with executives blaming poor marketing and “unclear brand positioning” under former management as contributors to poor sales.

“This crisis will absolutely set a new baseline for what component of the fleet [of stores] we want to keep,” Katrina O’Connell, Gap Inc.'s chief financial officer, said in an April call with Milwaukee-based investment firm Robert W. Baird & Co. “And we expect to remain aggressive in pruning the fleet so that we will end up with a smaller and more profitable business at the end.”

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All seven Gap stores in Philadelphia had remained closed during the pandemic. The company did not say which, if any, of the stores in the Philadelphia region might be permanently closed.

As of Thursday, the five Gap Inc. stores that had reopened were a Banana Republic at 1401 Walnut St. in Philadelphia, a Gap on 100 Coulter Ave. in Ardmore, an Athleta at 43 South State St. in Newtown, a Banana Republic at 1541 Main St. in Warrington, and a Gap at 17 South Main St. in Doylestown, a company spokesperson said.

Reopened stores would provide hand-sanitizing stations, urge customers to practice social distancing, and place plastic partitions in front of registers as a safety precaution, the company said.

"We’re eager to begin welcoming our teams and customers back to our stores, and confident in our ability to safely scale North America openings over the coming months in line with local guidelines,” Sonia Syngal, Gap Inc.'s chief executive, said in a statement earlier this month. She began in her position on March 23.

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During the reopenings, Gap Inc.'s corporate leadership said in the investor call, free-standing stores, which make up about 75% of all of the company’s locations, are expected to attract more traffic than stores embedded in malls, due to concerns over social distancing.

The company also projected that Athleta, which sells fitness and comfy-casual apparel as it promotes mantras about female empowerment, would be an “outperformer," according to the call, "given the values-driven active and lifestyle space the brand participates in.”

The outlook for Gap, whose “brand is much better than the business,” executives said, remained grim.

In 2019, the company said it planned to close 230 of its Gap stores over the next two years. Gap Inc. also said at the same time that Old Navy would be split off into its own business, but changed its mind early this year after suspecting that the costly and complex process of divorcing from Old Navy would not outweigh the “appropriate value from separation.”

When the pandemic struck, executives emphasized the company’s inclination to permanently close under-performing Gap stores — and reemphasized what Gap Inc., which recorded about $4 billion in sales in 2019 and most recently reported $1.7 billion in cash on its balance sheet — could expect from its most and least profitable subsidiaries.

“The poorly executed marketing messages and the inconsistent product point of view at Gap has continued to hinder the overall performance leading to really disappointing top line results,” O’Connell said.

The results have hurt the stock, which was $20.83 per share as of May 29, 2019, and closed at $9.59 a share Thursday, down $0.98 (9.27%).

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As the pandemic continued, Gap Inc. said, it would trim the buying of inventory as it assessed sales. The company said it had also taken other measures to manage its funds, from employee furloughs to executive board pay cuts, the details of which were not disclosed.

”Despite expectations for a recession, the surviving retailers will be able to realize a larger share of what’s likely to be a smaller apparel market,“ O’Connell said, speaking weeks before J.C. Penney, J. Crew, and Neiman Marcus would file for Chapter 11 bankruptcy protection. “We expect to be one of those survivors who will have leveraged our strong brands, our engaged customers, our advantaged online business and a smaller, healthier fleet to emerge positioned to gain share."