Gap New York Flagship Store Is Overwhelmed By Store Rents?

High store rentals are finally overwhelming.

The last straw in the flagship store of New York.

According to the world clothing and shoe net, after the first day of Christmas, and the most popular promotional day for consumers every year, Gap group announced its core.

The flagship store in Fifth Avenue, New York, will be closed in January 20th.

It is reported that the flagship store opened in 1998 and has a history of 20 years, with a total of three floors, covering an area of 40 thousand square feet. The initial annual rental of the Gap brand is about 80 million dollars.

Fifth Avenue in New York is the most expensive rentals for many years.

Streets, but this year is passed by Russell street, Tongluowan, Hongkong, China.

The latest report released by the New York real estate committee shows that although the rent between the forty-ninth and fifty-ninth streets of the Gap flagship store is 24% lower than that of the same period last year, the average rent is still up to 2973 US dollars per square foot, which means that the flagship store of Gap alone is over $100 million a year, and the rent alone costs US $about 9000000 per month.

Gap performance continued to slump, according to data, in the three months ended November 3rd, Gap brand sales fell 2.9% to 1 billion 283 million US dollars compared to the same period, while same store sales fell 7%.

In the conference call after the earnings report, Gap Group CEO Art Peck admitted for the first time that its brand performance continued to be under the pressure of retail rents, closing hundreds of stores to enhance its profitability.

According to the 2017 earnings report, the Gap group spends about $1 billion 300 million a year on rent, and since 2018, the Gap group has closed about 200 stores.

In addition to Gap, Gap group also owns 5 brands, including Banana Republic, Old Navy, Athleta, Intermix and Hill City.

However, analysts are still surprised by the decision of Gap to close the flagship store in Fifth Avenue in New York. It is impossible to understand why the sales performance of a store in the most prosperous neighborhoods of the world is not up to standard. It is considered that the closure of Gap flagship store is a bad sign for New York's retail industry.

Business Insider concluded its visit to the Gap entity stores in December 19th. It concluded that excessive promotions reduced the brand image and the price still exceeded consumer expectations, which was the main reason why Gap was no longer welcomed by consumers.

It is worth noting that on the same day when the news came out of Gap store, another industry insider disclosed that Italy luxury brand Versace is located in the flagship store of 647 Fifth Avenue in New York or will be relocated. At present, Cushman&Wakefield has launched a 5 year sublease proposal to the flagship store.

In October this year, Versace was renamed Capri group's Michael Kors for $2 billion 100 million, when the group planned to open 100 Versace stores in the United States after the completion of the paction.

It is reported that Versace flagship store or move to the more high-end upper city of New York.

According to the women's wear daily, 650 thousand square feet of luxury goods department Lord&Taylor on Fifth Avenue in New York will also begin to evacuate in January 2nd. The Abercrombie&Fitch, the teenage clothing brand, will be moved away from the fifty-third street and 54 street now, and will take over the flagship store that Gap will close.

In fact, retail sales in the US have been closed for a day.

American traditional retailers are facing a serious crisis in recent years. Over the past few years, tens of thousands of retail outlets have been closed in New York, most of which are replaced by American chain stores with relatively strong capital strength.

High rents destroyed New York's "block culture" and indirectly destroyed the once brilliant American fashion.

In addition to the above brands, in the past year, Ralph Lauren and L Brands's luxury handbag brand Bendel, located in the flagship store of Fifth Avenue in New York, has also been shut down, all of which are caused by unaffordable high rents.

Affected by this, the vacancy rate of Fifth Avenue in New York has risen sharply this year, from 10% a year ago to 20%.

It is reported that the Ralph Lauren closure of the flagship store in New York began in 2013, the original tenancy of 15 years, with a total area of 38 thousand square feet, the annual rent is as high as $25 million, and no brand or retail business has yet been found.

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The rise of vacancy rate also occurs in large shopping centers in the United States.

Reis Inc., a real estate data company, surveyed 77 large cities and surrounding areas in the United States this year, and found that the vacancy rate of us shopping centers rose to 8.4% in the first quarter of 2018, the highest level since the fourth quarter of 2012.

Although the number of retailers in the US has improved this year than in 2017, the situation is still not optimistic.

According to Coresight Research, as of December 19th, US retailers closed 5436 stores this year. The biggest loser was the bankrupt us toy retailer Toys R Us, which closed 735 stores. The most popular fashion retailers were Ann Taylor parent company and 500 stores.

There are many large luxury fashion retailers such as Guess, Michael Kors, Foot Locker, and so on, but the number of stores such as Michael Kors, Crocs and Guess has decreased compared with last year.

In addition to the reasons for its poor management, the economic environment and industry changes have also brought a great impact to the fashion retailing industry in the US.

When Trump took office in 2017, he launched a series of new policies to try to boost share price growth. However, the continued instability of the US geo economy has made investors worry that the bubble of the retail industry will soon be broken.

"The industry is still looking for a breakthrough," said Noel Herbert, a Bloomberg industry research analyst.

"I don't know how many shopping malls can be born again."

The increase in vacancy rate may mean that America's pain is just beginning.

It is undeniable that the shift of consumer spending habits to the mobile terminals has created opportunities for retailers, and has also put a lot of pressure on the offline retail business.

Many of the department stores and other retailers traditionally have been the backbone of shopping districts are shrinking or have collapsed.

According to the latest data released by MasterCard, sales growth in the US holiday shopping season was 5.1%, more than $850 billion, the strongest performance in 6 years, mainly due to the strong growth of online shopping 19%, while sales in department stores fell 1.3%.

CNBC expects that the "closing shop tide" may not end until 2020, depending on its negotiation with the American shopping center and store landlord.

What it means is that the industry has another way of thinking about "closing shop tides".

Ken Hochhauser, vice president of Winick Realty Group, points out that careful observation is not difficult to see that Fifth Avenue in New York is punishing the weak and rewarding the strong. "Now the market share of fashion retailers who have abandoned Fifth Avenue's gold position has been declining in recent years, and gradually derailed with young consumers, while Dior and other luxury brands are trying to find the right location to open new stores in the lot."

Vince, the high-end women's clothing brand in the US, said earlier that it would open a new store in Fifth Avenue 609 New York next year, which is located just opposite Rockefeller Center and has a very high flow of people.

The German sports brand Puma also looks at the block and will open a three flagship store in the second half of next year.

In November, Nike, the largest sports apparel brand in the United States, opened a new concept store with a floor area of 68 thousand square feet, up to six stories at Fifth Avenue 650.

Under Armour chief executive Kevin Plank also revealed that the brand new store located at Fifth Avenue 587 will open in the first half of 2021.

Ken Hochhauser further stressed that although the rent of Fifth Avenue is high, the volume and speed of human traffic exceed the average level of other streets in the United States.

According to statistics, a total of 20 million 100 thousand people crossed Fifth Avenue and Forty-second Street in November this year, which is 6.5 times the monthly visitor volume of Statue of Liberty.

Some analysts believe that the market may have reached a turning point.

Robin Zendell, a retail real estate agent in New York, said: "like Hunger Games.

If you are smart and innovative, you will be able to survive in this market.

Shopping malls and retailers have to learn to listen to the voice of a new generation of consumers.

In order to get the Gap brand to regain its lost market share as soon as possible, the group announced in February that its brand chief executive, Jeff Kirwan, was leaving, and her position was replaced by Neil Fiske, who had 20 years experience in professional retailing.

However, Neil Fiske after taking office is not easy. In addition to maintaining the stability of the business and inventory level, how to enhance the Gap brand's presence and popularity in young consumers is also a big challenge for him.

Art Peck revealed that as the trend of digitalization became more and more obvious, Gap group would focus on developing online business. Last year, the group's electricity supplier sales exceeded $3 billion. According to Art Peck, the number is expected to reach US $3 billion 500 million this year.

He said that the group has initially achieved the effectiveness of online shopping services through Old Navy, and will promote the digital pformation strategy of Old Navy to other brands of the group in the future, but refuses to provide specific details.

In addition, in view of the fact that Asia has become the most promising fashion market, Gap brand regards China as one of its breakthroughs, trying to further open up online and offline competition with other fast fashion brands and e-commerce providers for young consumers.

After yesterday's news, Gap group rose 4.62% to $25.82 yesterday, but the cumulative decline has been 23% this year, and its market capitalization is about $9 billion 800 million.

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