Gap Australia stores to close by January 2018

AUSTRALIA’S six Gap outlets will close by the start of next year after troubled handbag retailer Oroton ditched its joint venture.

Gap is closing in Australia. Picture: Elise Amendola/AP

AUSTRALIA’S six Gap outlets will shut by the start of next year after troubled handbag retailer OrotonGroup announced plans to end its joint venture with the US brand.

In a statement on Friday, Oroton Group said after a strategic review, it had decided to “focus resources on the strategy for the core Oroton brand”.

“OrotonGroup has entered into a binding agreement with Gap Inc to discontinue the Gap franchise and business in Australia, with store closures targeted for completion by 31 January 2018,” the statement said.

“As OrotonGroup is currently working through the details of the closure plan, it is too early to quantify the financial impact. However, this decision will end the Group’s future investment in the franchise, limiting related future losses.”

OrotonGroup chief executive Ross Lane said: “The Board and I thank the entire Gap Australia and Gap Inc. team for their dedication and substantial efforts to develop the Gap business in Australia over recent years. OrotonGroup also acknowledges the support and co-operation that it has received from Gap Inc. in amending existing arrangements.”

The listed retailer has been hammered by investors in recent months following a series of shock earnings downgrades, raising doubts about the company’s future.

In June, Oroton flagged it could be up for sale as it explored options to overcome falling sales and a precarious debt position. It came after investment bank Citi urged Oroton to ditch the Gap to refocus on its core business. Citi analyst Craig Woolford estimated exiting the joint venture would cost around $6 million.

Oroton said it was continuing to pursue options including a sale, recapitalisation or a refinancing of debt. “The Board notes that there is no certainty that this process will result in a proposal or transaction for OrotonGroup, nor what the terms of any such proposal or transaction would be,” the statement said.

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