Gap to invest $140 million into Texas warehouse as online sales swell

A pedestrian walks by the closed GAP flagship store on August 18, 2020 in San Francisco, California.

Justin Sullivan | Getty Images

Gap said Wednesday it will invest $140 million to construct a distribution center in Longview, Texas, as part of its effort to double its online business over the next two years.

Upon completion, Gap said the 850,000-square-foot facility will be able to process 1 million packages per day. Initially, it will be used for Old Navy’s burgeoning e-commerce business, then expand to other parts of Gap’s business.

Gap expects the facility will create more than 500 full-time jobs by the end of 2023, and more than 1,000 over the next five years. It also should bring more than 1,000 part-time and seasonal jobs to the area by 2026.

Construction will begin in April. Gap expects it to be fully operational by August 2022.

The Covid health crisis has accelerated the shift to e-commerce and has forced many retailers to rethink their investments, and pour more money into supply chains and logistics. The e-commerce giant Amazon has announced several investments in its warehouses, including building new ones, as its retail business has boomed over the past year. Big-box chains Walmart and Target have found ways to utilize their stores as mini fulfillment centers, while Macy’s took two of its department stores late last year and converted them into pint-sized distribution centers.

While Gap’s sales have slumped from 2019 levels during the health crisis, with fewer Americans visiting malls and shopping for apparel, the company has seen rampant growth online. And it expects that to stick around.

Gap has said it plans to derive half of its sales from the internet by fiscal 2023 as it closes underperforming stores and invests more in its growing Old Navy and Athleta apparel brands. The company is in the process of shutting roughly 30% of its namesake Gap and Banana Republic stores in North America, which will leave it with a larger presence online and away from malls.

For the quarter ended Oct. 31, Gap’s digital business grew 61% and accounted for 40% of total sales. The company said it added more than 3.4 million customers online during the period. Overall, revenue was about flat year over year during the quarter, at $3.99 billion.

Gap shares are up about 44% over the past 12 months.

The retailer is expected to report fourth-quarter earnings after market close on March 4.

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