Gap Stores in Israel to Close Shop After Only Six Years

Iconic U.S. brand never took off in Israel, with its six stores set to close in coming months.

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A Gap outlet in Jerusalem: Sales may be strong but profits are a different matter
A Gap outlet in Jerusalem: Sales may be strong but profits are a different matterCredit: Tess Scheflan

All of the Gap clothing stores in Israel will be shuttered in 2017, the local franchisee announced Thursday.

The iconic U.S. brand never managed to take off in Israel, which resulted in major red ink for franchisee Gottex Brands (also known as Zara Israel), in part because it had trouble competing in terms of price with other retailers in the Israeli clothing market.

There are currently seven Gap retail locations in Israel, since the Be’er Sheva store closed about a year ago. The remaining stores, which employ several dozen staff, will be shuttered on a staggered basis in the coming months.

When Gap entered the Israeli market about six years ago, it looked like it would be a retail success. The opening of the Gap store at the Mamilla Mall in Jerusalem drew major interest, with the store achieving some 250,000 shekels ($65,000) in sales in its first four hours of business. But the cachet waned and resulted in major losses for then-franchisee Elbit Imaging.

About four years ago, Gap’s Israeli operations were sold to Zara Israel – after months of efforts by Elbit Imaging to find a buyer. The purchase terms pegged the chain’s value at 40 million shekels, at a time when it had five stores. There were high expectations that Zara Israel would turn things around, but these hopes were never fulfilled.

Sources in the retail clothing industry were not surprised to hear that Israel never became the promised land for the local franchise. “The Gap brand never took off in Israel,” said one senior retailing source. “There was a buzz around it when it entered the country six years ago. But since then, they barely did anything. They only opened a few stores and never made a go of it: not on the level of product; not on the level of price; and not on the level of marketing. In my opinion, most people don’t even know where Gap stores are,” the source added.

“It’s a very competitive field,” said another industry executive, adding, “You can’t just come in, not do much and still expect to succeed. Other chains have come and opened one store after another, and it gave them impact. Gap remained with just a few stores.”

Gap has faced problems worldwide over the past decade, finding it difficult to compete with retail behemoths such as Zara and H&M. Its market share in the United States has declined to 4.4%, from 5.4% a decade earlier, and last month it recorded its 23rd straight quarter without sales growth. It closed 140 of its 800 American locations in 2015, with another 35 shuttered this year.

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