How Macy’s Store Closures Could Help Gap

Macy’s said last month it would close 100 of its 700 or so stores next year, raising the specter of more pain to come for the struggling mall sector. But the department store’s downsizing offers some competitors a silver lining. Take Gap Inc GPS -0.50% , a clothing chain undergoing its own sales declines and fleet reduction. Speaking at the Goldman Sachs Global Retailing Conference on Wednesday, Gap Inc CEO Art Peck said the company, which operates the Old Navy and Banana Republic brands in addition to its namesake brand, hinted the co-tenancy clauses in its contracts with mall operators could allow it to make changes to the leases if an anchor tenant closes and traffic drops. The two largest U.S. mall operators are Simon Property Group and General Growth Properties. “We’re watching that carefully to see if we have a co-tenancy clause issue which gives us a rent opportunity,” Peck told the Wall Street analysts. That suggests the Macy’s closings could allow the company to seek rent reductions. Though Peck didn’t discuss specific terms of Gap’s leases, many such contracts have provisions that allow a retailer to break a lease if traffic falls below a certain threshold. The Gap brand, which has closed hundreds of stores in recent years, operates some 862 locations in North America, primarily in malls. Read more at Fortune.