Dive Brief:

• Gap Inc. took another hit late Monday as it warned that all three of its brands will continue to report weak sales. Shares fell 9.9% to $19.65 in after-hours trading, according to the Wall Street Journal.

• Gap Inc. reported that Q1 same-store sales fell 5%, compared to a 4% decrease in the year-ago quarter. By brand, Gap Q1 same-store sales fell 3% (compared to a 10% dip a year ago); Banana Republic plummeted 11% (compared to 8% last year); and Old Navy dropped 6% (compared to a 3% increase last year).

• Meanwhile, Gap Inc.'s April same-store sales fell 7% compared to a 12% decrease a year ago. Same-store Gap sales fell 4% (compared to 15% last April); Banana Republic fell 7% (compared to 15% last April); and Old Navy fell 10% (compared to 6% last April).

Dive Insight:

For a while Gap Inc. was more or less saved by its Old Navy brand, which managed to shine through the troubles weathered by its flagship Gap and the Banana Republic brands. But now Old Navy is dragging the company down at the time that many thought its turnaround efforts would begin to bear fruit.

In a recorded call, Gap investor relations chief Jack Calandra blamed a “tepid macro environment” in apparel for worsening sales and traffic stumbles, according to news reports.

"This has been a disastrous quarter for Gap and one during which all of its main engines stalled and went into reverse," Neil Saunders, CEO of research firm Conlumino, told Reuters. "While the [Old Navy] brand has been the star of the show for many quarters, the past few collections have been dull and uninspiring.” 

In a note to clients issued late last month, Deutsche Bank analyst Paul Trussel expressed serious reservations about Gap prospects and said the retailer hasn’t closed enough underperforming stores. Despite a series of store closings in recent years, Gap North America will still operate 175 too many stores by the end of the year, according to Trussel.

Gap said Monday it is identifying opportunities to streamline its operating model to improve efficiency and flexibility, and is also evaluating its Banana Republic and Old Navy fleets, focusing primarily on stores outside of North America.

“Our industry is evolving and we must transform at a faster pace, while focusing our energy on what matters most to our customers," Gap CEO Art Peck said in a statement. "We are committed to better positioning the business to recapture market share in North America and to capitalizing on strategic international regions where there is a strong runway for growth.”