Gap to close 175 stores and lay off 250 HQ workers

Gap plans to close 175 namesake stores, about 26 percent of its North American locations, over the next several years in an effort to streamline its store fleet.

The retailer, which operates Gap, Old Navy and Athleta stores, will also cut about 250 jobs at its corporate headquarters this fiscal year.

Gap estimates an annualized sales loss of about $300 million associated with the store closures. It will also take a one-time cost of up to $160 million.

In an interview with CNBC's Courtney Reagan, Gap CEO Arthur Peck said the retailer needed to take complexity out of its strategy.

"Job No. 1 there is to great product that's right for the brand and trend right back into our stores," Peck said. "By these decisions today I think we streamlined the organization, and we frankly eliminated some of the complexity in the fleet that wasn't getting us very far, to get back to a fleet that we're proud of."

Peck said he is confident Gap is at the right size and has some of the best real estate in the region.

The company will operate about 800 stores in North America after the restructuring.

Separately, Gap reaffirmed its previous full-year earnings guidance of between $2.75 a share and $2.80 a share.

Last month, the company, which has seen seen more than a year of monthly same-store sales declines, said it was placing its bets on more compelling merchandise hitting stores this spring.

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That's when it expects to see the influence of new design chief Wendi Goldman, whose résumé includes stints at Saks Fifth Avenue, Banana Republic and C. Wonder.

The brand has been criticized for not including enough color, or having the right fit, in its assortment.

"We have had a women's business challenge now for several seasons running," Peck said. "I believe we have diagnosed it correctly ... and I can promise you that the team is all over it."

—CNBC's Courtney Reagan and Krystina Gustafson contributed reporting.