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LOS ANGELES (Reuters) - Retailer Gap Inc. (NYSE:GPS - news), seeking to focus on problems at its two main apparel chains, said on Monday it would shut down its newest chain, Forth & Towne, a move that will affect about 550 employees.

The company expects pretax expenses of $40 million for the closure of the 19 Forth & Towne stores in 10 U.S. markets. The expenses will be recognized over the first and second quarters.

Forth & Towne, designed to appeal to women between the ages of 35 and 50, was launched in August 2005. The stores featured larger, centrally located dressing rooms and were stocked with accessories, including handbags and shoes, to help women put together full outfits and drive impulse purchases.

"We made the tough decision to close the brand and focus our efforts on stabilizing the existing businesses," Robert Fisher, Gap chairman and interim chief executive, said in a statement.

The company said a thorough analysis found that Forth & Towne was not demonstrating enough potential to deliver "an acceptable long-term return on investment."

Forth & Towne was expected to compete with department stores, including Federated Department Stores Inc.'s (NYSE:FD - news) Macy's chain, and chain stores like Talbots Inc. (NYSE:TLB - news) and AnnTaylor Stores Corp. (NYSE:ANN - news), which sell to career women.

FOCUS ON PRIMARY BRANDS

Although analysts had recognized the underserved market that Forth & Towne was aiming for, some on Wall Street had criticized former Gap CEO Paul Pressler -- who left the company in January -- for focusing on new growth opportunities before fixing persistent problems at the company's two largest chains, Gap and Old Navy. Gap also operates the more upscale Banana Republic chain.

Gap is struggling to turn around a sales slump more than two years old that has seen once-loyal customers flee to rivals. Critics have cited fashion missteps, uninspired merchandise and confusing brand messages as reasons for Gap's problems.

"We believe the closure of Forth & Towne is immaterial to the Gap business overall but it demonstrates that Gap management is focused on right sizing operations to improve profitability and product focus," wrote analyst Richard Jaffe in a research note.

In November, Gap launched an online shoe venture, Piperlime.com, designed to compete with popular online footwear retailers like Zappos.com.

Gap shares were down 12 cents at $19.69 in midday trade on the New York Stock Exchange. The shares have traded between $15.92 and $21.17 over the past 52 weeks.