Gap closing chain to focus on its key brands

SAN FRANCISCO -- Gap Inc. is closing the Forth & Towne chain that was supposed to help the struggling retailer sell more clothes to older women, aborting the 18-month expansion so management can concentrate on reviving the company's more established brands.

The decision disclosed yesterday affects all 19 Forth & Towne stores opened since Gap unveiled the concept in West Nyack, N.Y., north of New York City in August 2005. Forth & Towne's other stores are located in Atlanta, Chicago, Houston, Seattle, San Francisco, Los Angeles, San Diego, San Jose, and Santa Barbara.

The closures are expected to be completed by the end of June, jettisoning about 550 jobs. Some affected employees may be transferred to one of the San Francisco-based company's other chains -- Gap, Old Navy, and Banana Republic.

Signaling that some layoffs are likely, Gap is budgeting $7 million to cover severance payments and other benefits , according to a filing with the Securities and Exchange Commission.

Gap hoped to develop Forth & Towne into a specialty chain catering to women older than 35 who grew up in Gap jeans but found themselves sized out of the market. When it launched Forth & Towne, Gap estimated it only held a 3 percent share of the over-35 female market compared to an 8 percent share of women shoppers under 35. Gap had hoped to woo back boomers with a store combining the service of a boutique, the offerings of a department store, and a more forgiving fit.

"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 Gap chairman Bob Fisher.

In a key measure of a retailer's health, Gap's same-store sales fell 7 percent last year, deteriorating from a 5 percent decline in 2005.

Despite its troubles, Gap intends to continue investing in other promising concepts, including a recently launched online shoe store called Piperlime, company spokesman Greg Rossiter said.

Although abandoning Forth & Towne will drive up Gap's expenses by about $40 million during the first half of this year, industry analysts believe the company will be better off.

"This brand never gained much traction, suffered from fit, style, and image problems, and became a big distraction," Lazard Capital Markets analyst Todd Slater wrote in a research note.