Banana Republic Continues to Disappear

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Gap Inc. (NYSE: GPS) posted good news about its holiday sales, in contrast to nearly every other large brick-and-mortar retailer. However, among its three major divisions — Gap, Banana Republic and Old Navy — Banana Republic same-store sales fell 7% in December, on top of 9% in December 2015. The flailing Gap division was founded in 1978 and is considered Gap’s effort into a more upscale market than its flagship brand is.

Gap’s most recent numbers:

December Sales Results

Gap Inc.’s net sales for the five-week period ended December 31, 2016 increased 3 percent to $2.07 billion, compared with net sales of $2.01 billion for the five-week period ended January 2, 2016.

The company’s comparable sales for December 2016 were up 4 percent versus a 5 percent decrease last year. Comparable sales by global brand for December 2016 were as follows:

Gap Global: positive 1 percent versus negative 2 percent last year
Banana Republic Global: negative 7 percent versus negative 9 percent last year
Old Navy Global: positive 12 percent versus negative 7 percent last year

The overall strength of numbers came as a surprise because, in November, Gap indicated its holiday season would be troubled. It increased the number of stores it expected to close in 2016 to 65 from 50.

Gap’s brand management problem looks something like that of Sears Holdings Corp. (NASDAQ: SHLD), which operates the Sears and Kmart chains, and several other brands that do not have their own stores. Among these, Craftsman was just sold for $900 million to Stanley, Black & Decker. Gap must be in the process of making decisions about which brands to support and which to starve.

Like a number of other retail brands, Banana Republic’s days soon may count down to zero. It sells an extremely wide selection of clothes, shoes, bags, hats, sunglasses and accessories. Maybe that is its problem: being too many things to too many people, in a retail environment in which the competition for each of these things is so impossibly fierce.

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