Gap looks at shrinking some stores to save money

Pedestrians pass by a Gap clothing store in Washington August 17, 2007. (REUTERS/Kevin Lamarque)

CHICAGO (Reuters) - Apparel retailer Gap Inc <GPS.N>, which has had declining revenue for three of the last four quarters, wants to reduce the amount of space it uses in some malls so it can cut expenses, its chief executive said on Tuesday.

Gap is looking at the 40 million square feet of store space it leases more as an asset than as a cost, CEO Glenn Murphy said, according to a transcript of his comments at a Piper Jaffray investor conference in New York City.

"How are we going to monetize it and maximize it to make sure we can get the P&L (profit and loss) benefit by doing the work that needs to be done on this 40 million square feet?," Murphy said.

One way is to cut the size of some of its stores thereby saving on rent, Murphy said. Gap should be able to do that in some malls because the stores are in good locations, he said.

Gap will look to combine smaller stores for kids and babies into its larger namesake stores, Murphy said.

A company spokeswoman said Gap would also reassess how much space is devoted to various types of merchandise in some stores.

"We got carried away because we were doing so well and confidence sometimes turns into another word and the next thing you know you have larger stores than you need," Murphy said.

Most of the benefits from the real estate overhaul will not be seen until 2009, Murphy said.

Gap shares closed up 70 cents at $17.69 on Tuesday on the New York Stock Exchange.

(Reporting by Brad Dorfman; Editing by Toni Reinhold)