On Wednesday December 26th, Gap announced it will be permanently closing its three-level store on Fifth Avenue and West 54th Street, as of January 20th. As reported by the NY Post, the closure is part of a company initiative to scale back its physical locations. The store, which is in midtown’s prime shopping avenue, once served as the company’s flagship store. It is located within a few blocks from other retailers such as Tommy Hilfiger, Zara, Dolce & Gabbana and Hollister.
In its latest quarterly results reported in November, the company revealed that sales throughout Gap stores, open for at least a year, had dropped 7 percent, marking a disappointing quarter for Gap. The brand has been underperforming the company’s other brands for some time now. Old Navy, which has become the company’s star performer, saw sales growth in the last quarter.
On a November 20th call, Art Peck, the CEO of Gap Inc., said the “bottom half” of its 775 Gap stores around the globe was causing a strain 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.” While he announced that hundreds of “underperforming” stores across the US would be closed, this store on Fifth Avenue was not on the list of closures.
The high cost of rent in the area is obviously a throttle to the store’s success. As per Cushman & Wakefield, the stretch of Fifth Avenue between 49th St. and 60th St. ranks as the second-most expensive retail street in the world, the first place title being recently given to Causeway Bay in Hong Kong. The area saw some relief from rising retail rents this year, but the average asking rent in the area is still $2,973 per square foot, a hefty load for stores to drag. Fifth Avenue between West 49th and 59th streets saw the average retail rent drop 24 percent this year, according to CNBC. A study by the Real Estate Board of New York concluded that 15 of Manhattan’s 17 most-prominent retail corridors have already seen rent reductions over the year.
Another obvious reason for the closure of the prime location is the familiar explanation about internet sales hurting brick-and-mortar stores. As reported by the Post, there has been a vast increase in the volume of New York City’s retail space over the past 12 years.
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