Gap to Close Forth & Towne Stores
Tuesday, February 27, 2007
Gap Inc. announced plans yesterday to shutter its Forth & Towne division, which catered to women ages 35 and older, saying it would instead focus on turning around the company's struggling flagship and Old Navy brands.
Forth & Towne was launched 18 months ago in New York and Chicago to much fanfare as a place for fashion-conscious baby boomers to shop without fear of running into their babysitters in the dressing room. Locations in Houston, Atlanta, Seattle and across California followed over the past year. The chain has 19 locations, and Forth & Towne President Gary Muto once said he planned to have 25 stores by the end of this year.
But that was before the departure of Gap Inc. chief executive Paul S. Pressler in January after a disappointing holiday season. The company reported that December sales were down 4 percent, to $2.34 billion, compared with December 2005. Sales at Gap stores in North America open at least a year fell 9 percent, while at Old Navy that figure dropped 10 percent.
Gap Inc. executives said yesterday that those problems are demanding their full attention. In addition, Forth & Towne was not "demonstrating enough potential" as a long-term investment, the company said. It does not report sales information for Forth & Towne.
"Forth & Towne was a great test of a promising concept and an illustration of the innovative risks you need to take in our business," said Bob Fisher, chairman and interim chief executive at Gap Inc. "We made the tough decision to close the brand and focus our efforts on stabilizing the existing businesses."
Closing the fledging Forth & Towne is not likely to have much effect on the retailer's bottom line, analysts said. There are more than 2,800 Gap, Old Navy and Banana Republic locations in North America, compared with less than two dozen Forth & Towne stores. Still, yesterday's move was a sign that the retailer is ready to make major changes.
"There's so much to fix in the core business," said Sucharita Mulpuru, a senior analyst with Forrester Research. "I think it would've been a management distraction to keep going with Forth & Towne."
Forth & Towne touted "grown-up style" and was designed to compete with established apparel chains such as Chico's and J. Jill, among the retailers to target the boomer demographic. Stores hired employees in their customers' age range and dubbed them "style consultants." The spacious fitting rooms sit in the center of the store, rather than tucked in the back, -- and are outfitted with three-way mirrors and adjustable lighting. And company executives picked Muto, who one analyst called "the last successful president" of Gap stores, to lead the initiative.
But as the parent company continued to falter, Forth & Towne seemed to stumble as well. Analyst Richard Jaffe of Stifel Nicolaus said the strategy of offering four lines of clothing -- Allegory, Vocabulary, Prize and Gap Edition -- to appeal to differing lifestyles made the brand feel more like a department store and less like a specialty retailer.
"As a result, its merchandising efforts were inconsistent and spotty," Jaffe wrote in a research note yesterday.
The retailer estimated pretax expenses of $40 million to close the chain, with stores shutting down by the end of June. About 550 employees will be affected, including some at Gap's headquarters in San Francisco. The company said it is seeking to move those workers to its other brands when possible.
Continuing to build the Forth & Towne brand would cost the retailer millions of dollars not only in store locations but also likely catalogue and Internet presence, Mulpuru said. Shuttering the brand takes the retailer yet another step away from the tenure of Pressler, a former Walt Disney Co. executive who streamlined Gap's operations but failed in fashion.
"The company's not in the position to make that kind of investment in a new business when the core business is choking," Mulpuru said.
The top ranks at Gap Inc. have been in flux so far this year, with changes at the helm for both Gap and Banana Republic. The company's board of directors said last month that it was conducting a review of Old Navy and Gap stores to be completed by Thursday, when the retailer is slated to report its fourth-quarter results.