Gap Tests Banana Republic Spin-Off

by Sarah Mahoney, Mar 23, 2009, 4:01 PM

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Gap Inc. is reportedly testing a new format, a 1,500-square-foot Banana Republic spin-off that will sell nothing but accessories. Called Edition, the new concept will sell limited-editions of handbags and jewelry as well as accessories sold at Banana Republic--much of it priced below $100, reports Women's Wear Daily.

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."

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0 comments on "Gap Tests Banana Republic Spin-Off ".

1. Lorna Lyle from TMC
   

   commented on: March 24, 2009 at 9:45 a.m.

   Coach's featured looks have gotten too trendy and "blingy." How many will consider spending $400 on a handbag which will be out of style in a year? They need to get back to re-inventing their classics.

2. April Hartsock from Self Employed
   

   commented on: March 24, 2009 at 10:35 a.m.

   Articles posted just in these newsletters have commented on how consumers are still spending on accessories or cosmetics as a way to still be current without purchasing a new seasonal wardrobe.

   The rent on a 1500 square foot store could easily be a bargain these days as malls have more and more empty doors.

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