Could Gap Close Banana Republic Stores and Move Online?

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The revenue and same-store sales of Gap Inc. (NYSE: GPS) suffered, again, in the five weeks that ended October 1. Two of its divisions, Gap and Old Navy, had results that were less than catastrophic. Banana Republic did not. After years of shuttering stores, Banana Republic may run out of runway and may need to find a profitable alternative to stores. That may press it to survive online.

For the five weeks that ended October 1, Gap’s net sales dropped 2% from the same period a year ago to $1.43 billion. Sales-store sales across all brands fell 3%, after a drop of 1% for the same period in 2015. Much of the recent retreat was because of a warehouse fire.

Gap same-store sales fell 10%, half of which was blamed on the fire. Old Navy sales dropped 4%, with 2% due to the fire, while Banana Republic saw a 9% decline, of which 3% was due to the fire. A year ago, Gap same-store sales were flat for the five weeks, and Old Navy and Banana Republic dropped 5% and 10%, respectively.

There are some precedents for retail businesses that operate online only. One is men’s grooming site Birch Box, and another meal supplier Blue Apron. According to Internet Retailer, Blue Apron will have $600 million in sales this year.

Gap faces the traditional problems with a retreat from stores: cutting employees and leases. With so much practice in both in the past three years, the company should at least have a good road map that could be used for Banana Republic.

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