Gap Tests Banana Republic Spin-Off
The first store is said to be scheduled for the Westfield Mall in San Francisco, which already has a Banana Republic store.
Gap officials did not return phone calls, but longtime observers are skeptical of Gap's strategy for experimenting with new formats when its core business continues to be so disheveled.
"Here you have this gigantic, $15 billion business, the largest apparel business in the U.S., and it's been under water for six years," says Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking company based in New York. "Why would you do something like this now? Let's just say this idea is a big success--what difference would it make to the larger issue? You've got a troubled business--shouldn't you take every bit of energy and focus and capital and try and fix the problem?"
The move comes at a time when many retailers are shutting down tests and concept stores, and when other accessory chains are struggling. In its most recent quarter, for example, Claire's shuttered nearly 120 stores, while comparable-store sales fell 7.2%.
"Sure, accessories are appealing--they take up less space, the margins are higher, you can do more in the way of product differentiation. But look at Coach, and there's--never been a better accessories chain. Even Coach is doing lousy in this economy. It's not that simple," Davidowitz says.
Gap recently said it would reduce the size and compensation of its board to cut costs, and while most clothing stores are hurting, Gap same-store declines have been painful. "And while Banana Republic may be doing better, in comparison to Old Navy or the Gap brand, it's not doing well," he says. Nor are Gap's problems all about consumers reining in spending. "The Buckle focuses on denim, too," says Davidowitz, "and their sales keep rising--they're hitting it out of the park. If the product is right, people are shopping."