Dive Brief:
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Gap Inc.’s Banana Republic chain will shutter all of its eight U.K. stores next year as part of its strategy to close underperforming overseas stores, according to multiple news reports. The brand will continue to operate a store in France and one in Italy, according to Bloomberg.
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Gap announced in May its plans to close 75 overseas Old Navy and Banana Republic stores, including 53 Old Navy stores in Japan, to focus on the best regions to expand globally, Bloomberg reports.
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The brand’s European unit has lost steam as of late. Second quarter net sales, reported in August, declined to $17 million from $20 million in the same period last year.
Dive Insight:
While Old Navy has been Gap Inc.’s saving grace in recent years, Banana Republic has, by contrast, been a consistent drag on results for several quarters.
Banana Republic Global in September reported a 9% same-store sales decline, including an estimated negative impact from the Fishkill distribution center fire of about 3 percentage points. That beat a 10% decline last September and narrowly edged expectations for a 9.1% decrease from Retail Metrics, which noted that Banana Republic has now racked up 15 consecutive negative monthly comparable sales declines and 18 in the past 19 months.
But there may be light at the end of the tunnel for the struggling brand. Guggenheim’s Howard Tubin noted in an August blog post that there’s evidence Banana Republic is improving its assortments: “Banana Republic is delivering more commercially friendly patterns and key item offerings.”
However, other analysts have noted that poor fit and style misses have taken their toll. "The main issue is that Banana Republic’s proportion isn’t working,” Neil Saunders, managing director of retail research agency and consulting firm Columino, told Business of Fashion. “This is true globally, but is especially acute in the U.K. where the business is small and doesn’t benefit from the volume that it does within the U.S. The assortment [of clothes] is at the heart of Banana’s issues and symbolizes a brand that has lost its way. Customers are confused and, of course, increasingly unwilling to pay the premium that Banana once commanded. As a consequence the brand is falling into exactly the same trap as Gap as it resorts to discounting and deals to shift merchandise.”
The inability to present a top price appears to be leading Gap Inc. to convert some full-line Banana Republic stores in the New York City area to outlet stores, targeting locations in urban shopping districts, according to the New York Post. Three will be converted this year, among them a store in Forest Hills, Queens. While it may seem rational, that’s a move that could further undermine the brand.