Gap Inc.'s Old Navy is pulling out of Japan.
The chain will close its 53 stores in the country this year to refocus on North America and China, according to a statement on Thursday. In another sign of the San Francisco-based company's difficulties, Gap did not reaffirm its earnings forecast for the year, saying the retail climate would have to improve in order to meet the target.
"As the pace of change across the apparel industry increases, now is the time to accelerate our transformation," Chief Executive Officer Art Peck said in the statement.
Peck is taking more drastic measures after a planned turnaround this spring failed to materialize. The 60-year-old CEO, who took the reins last year, has had to combat sluggish store traffic and problems with the company's product assortment. On top of that, the Old Navy business — once a bright spot — is now suffering from declining sales.
In all, Gap is shutting down about 75 locations in a bid to revamp its struggling operations. The hope is to save $275 million a year from the move and improve operating margins by 2 percentage points. But the Gap and Banana Republic brands will remain in Japan, where they have more than 200 stores combined.
Gap reported earnings of 32 cents a share last quarter, in line with analysts' estimates. Sales fell about 6 percent to $3.44 billion in the period, which ended April 30. The company telegraphed the numbers earlier this month, saying that profit would be in the range of 31 to 32 cents.
Gap shares have lost 30 percent of their value this year through the close of trading Thursday.
Gap's long-term issuer default rating was cut to junk status by Fitch Ratings earlier this month.