Beloved retailer makes comeback after closing 100s of stores

GAP +8.24% AEO +5.76% ANF +3.04%

In the 1980s and 1990s, there was no better place to see and be seen than the mall, and like most of us, we'd visit regularly to find that perfect look.

In the 80s, that meant fluorescent colors popularized by Sonny Crockett on Miami Vice. In the 1990s, that meant shopping at iconic stores like American Eagle, Abercrombie & Fitch, and, of course, The Gap.

Gap Stores helped define the American casual look, popularizing khakis, tees, and white shirts. It was a go-to store for people in their teens, twenties, and thirties, which enabled it to become a nationwide retailer boasting over 2,000 U.S. locations and more than 500 international stores.

Gap Inc. at a glance:

• Founded: 1969, San Francisco, CA Source: Gap Inc.

• Store brands: Gap, Old Navy, Banana Republic, Athleta Source: Gap Inc.

• Store count: 2,486 Source: Gap 10-Q SEC filing

• Employees: 82,000 Source: Macrotrends

Nowadays, The Gap looks very different. Fashion changed, e-commerce started taking a toll on indoor malls (where most Gap stores are located), and low-cost rivals, from H&M to big-box Goliath Walmart, began offering similar options for less money.

As a result, foot traffic and sales at Gap stores dipped, leading the company to close 80% of its Gap namesake stores to focus on other store brands, including its low-price fast-fashion Old Navy brand.

The changes have shifted the company's retail focus and arguably better positioned it for an impressive comeback this year.

The Gap has a storied history

The Gap has seen plenty of apparel trends come and go. Its first store opened in 1969 in San Francisco, and over the years, it's had to reinvent itself to continue winning over shoppers.

Initially, the retailer sold Levi's jeans to young adults aged 13 to 25; however, The Gap's product line shifted toward khakis and shirts in the 1990s under the leadership of CEO Millard “Mickey” Drexler.

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Drexler successfully orchestrated a major expansion that grew The Gap’s store count from about 1,100 in 1990 to 2,548 stores in 2000. He expanded the company's success by launching the highly popular Old Navy and Banana Republic retail store brands, enabling the company to target shoppers of different ages and income levels.

Since Drexler left in 2002, however, Gap's namesake stores have struggled. The company attempted to turn things around with an ill-conceived brand refresh in 2010, which ditched its iconic blue square logo, only to have to abandon the move after customers revolted quickly.

The stores continued to experience declining market share as tastes shifted and rivals encroached on its territory, including players like Walmart and Target, which made major pushes to target younger shoppers with brands specially designed for them, such as Walmart's No Boundaries.

Gap’s situation has been further complicated by the embrace of e-commerce for apparel and its impact on indoor malls, where most of The Gap stores were located.

Gap gets hit by changing customer behavior

Many indoor malls were struggling before the Covid pandemic, including large national chains that served as anchor tenants at these malls. Walmart’s major expansion in the 1980s and 1990s dealt a significant blow to the likes of Sears and Kmart, for example, which was intensified by the rise of online shopping.

Sears and Kmart closed thousands of stores before they went bankrupt (Kmart merged with Sears in 2005, and the merged company declared bankruptcy in 2018). The loss of those anchor stores put a dent in traffic to indoor malls. According to Placer.ai data, annual indoor mall visits were just about flat in 2019 before collapsing 41.1% in 2020.

The Covid shutdown was a significant catalyst for Gap to reassess its footprint. Former CEO Sonia Syngal announced that the retailer would close 220 of its namesake stores in October 2020 and close 130 Banana Republic stores to right-size its business amid the “hyper casualization” trend that contributed to Lululemon’s success.

"It's no secret five years ago, we were a fleet that was underperforming. I mean, significantly under a lot of pressure, and we executed a fleet rationalization that dated 2020... In 2020, we began that, and it was heavy lifting over the course of those years. We closed over 350 stores," said current CEO Richard Dickson at a Goldman Sachs retail conference in 2025.

The company's “Power Plan 2023" aimed to reposition itself away from Gap stores toward Old Navy and its Lululemon rival brand, Athleta. That plan was yet another reason why its namesake store count fell by about 80% to 472 stores from 2,505 stores worldwide in 2000.

"We had declining top line. We had brands that were losing share. We had an aging fleet. We had bloated inventory. We had a lot of margin pressure. We had bloated costs. We had low morale. So this was a portfolio of brands that were iconic and recognized. But the performance of our business didn't reflect, if you will, the legacy and the IP value that was inherent in our portfolio," said Dickson.

Gap gets back to growth

Gap's decision to focus on Old Navy has paid off, with Old Navy becoming a leading apparel retailer for parents, kids, and young adults seeking affordable fashion.

The Old Navy brand includes over 1,300 stores worldwide, including 1,139 in the United States.

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Old Navy's customer base means that it has a better-than-average shot at capturing the core key back-to-school spending on clothing, and the company's recent third-quarter financial results show that Old Navy once again delivered the goods for shoppers. Comparable store sales growth at Old Navy stores open at least one year rose 6%.

"The quarter began with a robust back-to-school season, reinforcing its leadership position in kids and baby in the U.S. denim posted its highest third quarter volume in years with growth across the family. Women's and girls' showed particular strength driven by trend-right styles like barrel, wide leg and baggie fits," said Dickson on the earnings call.

Dickson called out strength from collaborations with Disney (Jingle Jammies collection) and Anna Sui, which focused on affordable high fashion designs and featured Gen z artist PinkPantheress.

It wasn't only Old Navy that was strong, though. The company posted positive comparable store sales growth across Old Navy, Gap, and Banana Republic.

Gap namesake comp store sales grew 7%, the 8th consecutive quarter of positive comp store sales growth due partly to its Better in Denim campaign featuring Katseye.

"Better in Denim culminated in a global cultural takeover and has become one of the brand's most successful campaigns to date, generating significant traffic and double-digit growth in denim," said Dickson.

Banana Republic comp sales rose 4%.

As a result, overall comp store sales were up 5% from the same period last year, marking the fastest comp sales growth in four years. Total revenue rose 3% from one year ago to $3.9 billion.

What’s next for Gap?

Gap's performance shows it has momentum, and its plans to keep customers returning include a significant push for beauty products at Old Navy and CashSoft at Gap.

The company's one hiccup, however, is Athleta. The brand had capitalized on the athleisure wear trend, elbowing away sales from Lululemon. However, shifting trends away from that style of clothing have dented its growth. Athleta's comp sales fell 11% in the quarter from one year ago.

The company believes it can continue to drive sales growth, but only time will tell. Apparel is fickle, and rising unemployment could be a headwind to future apparel sales, given that they're discretionary purchases.

Regardless, Gap is on firm financial footing. It generated 62 cents per share in profit, and its cash war chest rose to $2.5 billion exiting the third quarter, despite paying $62 million in shareholder dividends last quarter and buying back $152 million in stock year to date.

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This story was originally reported by TheStreet on Nov 22, 2025, where it first appeared in the Retail section. Add TheStreet as a Preferred Source by clicking here.