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.