Gap Inc. is floundering, and Banana Republic is one of its biggest problems.
Banana Republic’s comparable sales declined 17% for the month of January, versus a 2% increase this time last year.
For the fourth quarter as a whole, Banana Republic’s comparable sales dipped a staggering 14%, versus a 1% increase last year.
Sales do not take nosedives out of nowhere; there has to be something that’s off-putting to consumers.
In November, we visited a nearby Banana Republic to try to figure out why the retailer’s sales might have been declining. The answers were obvious — the store was a mess, there were ample style misses, and the store seemed to be catering to a younger demographic, as though it was aspiring to be Forever 21.
But now, all of the fall and winter apparel that failed to resonate with consumers is hanging on Banana Republic’s clearance rack, thereby starting the first quarter of fiscal 2016 off on a low note.
The fourth quarter is already notorious for promotions, and that’s true for any retailer. There are holiday sales and then ample discounts to make way for spring collections. During a third quarter earnings conference call, Art Peck, CEO of Gap Inc., stressed how the fourth quarter “is always a very promotional quarter.”
But as of now, Banana Republic’s women’s clearance section in its Flatiron district unit in Manhattan takes up nearly an entire section of the store, as though telling consumers that these items were unwanted; it’s the island of misfit apparel.
Discounts can derail a brand, as it conditions consumers to never shop full-price.
In order to get consumers to pay full price, Banana Republic would have to be selling something that was really worth their while.
But it seems that Banana Republic will have to resort to even more promotions to get rid of what’s currently on sale, such as this skirt that seems ripped from the annals of Forever 21’s history.
Banana Republic has been missing the mark with is target demographic. The company aspires to sell “updated classics with a twist,” as Art Peck, the CEO of its parent company, Gap Inc., put last fall.
That’s not to say everything is a complete disaster; classic sweaters are always a must-have for the fall and winter. But up until recently, the weather has been unseasonably warm. This has been hugely problematic for retailers. (To make matters worse, the crippling blizzard this January wasn’t good for retailers, either. It was nearly impossible for retailers to win in January!)
So unsurprisingly there are ample sweaters in the sale section.
Even the sweaters that are not in the sale section are on sale.
The company knows that consumers want their apparel faster. In an ostensible attempt to compete with fast fashion retailers like Zara, Banana Republic is launching a new program during this month’s Fashion Week, wherein consumers will be able to purchase the clothes they see on the runway immediately. Normally, they would have to wait until the fall of this year, late summer the earliest.
However, in order for that to work, they need to like the clothes. Hopefully, Banana Republic has been listening to its frustrated customer and will churn out clothes that they want to buy immediately. After all, Zara is known not just for its runway-esque looks, but for its affordable prices.
Fortunately, some of Banana’s regular-priced apparel for the forthcoming season shows some promise, and seems to be in line with Banana Republic’s style ethos. It’s just a matter of if consumers will be willing to pay full price, a task that seems even more daunting considering how even fast fashion brands are scooping up more affluent consumers by launching pricey offshoot lines.
Gap Inc. has a lot of work to do to repair both Banana Rpeublic and its namesake brand.
“The problems at Banana and especially at Gap are deeply entrenched. As much as Gap tries to move forward there is absolutely no evidence of this on the shop floor,” Neil Saunders, CEO at research firm Conlumino, wrote in an email to Business Insider. “The product is bland and dull and the prices are inappropriately high, hence the steep and continuous discounting. In my view it needs to rip up the rule book and start over!
Gap Inc. reports its full fourth quarter earnings on February 25th.
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