Gap Inc will shutter 175 stores in digital turnaround effort

The company also plans a reduction of about 250 positions within its San Francisco headquarters during 2015.

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Over the last two decades, apparel retailer Gap banked on the popularity of denim basics to drive foot traffic into its stores.

But now that shoppers have officially gone digital, it looks like blue jeans and Oxford shirts just aren't enough to keep customers coming back.

The nearly 50-year-old retailer, which also owns the Old Navy and Banana Republic brands, announced this week plans to close 175 of the 675 Gap stores over the next few years, resulting in annual sales losses of around $300 million.

The company also plans a reduction of about 250 positions within its San Francisco headquarters during 2015.

Those losses, however, are expected to be offset by the company's revamped digital initiatives, which include improvements to its online and mobile channels. Gap is also planning to invest in more personalized marketing initiatives.

"The retail industry is at a pivot point, where digital experiences are redefining how customers shop and engage with brands," Gap CEO Art Peck said in a statement Tuesday. "We're constantly testing and rolling out new innovations to ensure we stay ahead of the customer and, ultimately, thrive in a time of disruption."

Earlier this year Peck admitted to quality, fit and trend issues within Gap's women's line of clothing -- issues which were likely tied to the firing of creative director Rebekka Bay in January.

After Peck took the helm of Gap in February, the company brought on former co-president at Victoria Secret Wendi Goldman as executive vice president of Gap's product design and development team, with the hopes of attracting the crucial demographic of millennial shoppers away from trendier rivals like H&M and Zara.

Looking at the bigger picture, it's clear that Gap is a little late to figuring out the whole omnichannel/e-commerce game. But the store closures make a lot of sense, especially as shoppers are buying more online and less in-store. With that equation, retailers don't need the expansive footprint of decades past, and are now focusing investment in and improvements to their mobile and online channels.

After the closures, Gap will have 500 specialty Gap stores and 300 outlet stores in North America. Gap does plan to close some stores in Europe, but it's not clear at this point exactly how many.

Not all geographies are failing for the retailer, however. Gap says it plans to focus its brick-and-mortar growth to China, where sales have grown to nearly $500 million in just over four years and e-commerce sales expanded by about 60 percent year-over-year between 2013 and 2014.

Gap is holding its annual investor meeting this afternoon in San Francisco, where more details of the company's digital strategies will be revealed. Updates to follow.

Image via Flickr.

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