We went to Banana Republic and saw why it's Gap's worst nightmare
For the month of July, Banana Republic sales plummeted 14%, compared to a 10% drop last year. For the second quarter, sales were down 9%, compared to dipping 4% last year.
In June, the parent company turned a positive quarter, with comparable sales up 2%. But in July, Gap Inc. as a whole saw sales decline 4% for the month of July, and sales dipped 2% for the second quarter, dashing hopes of a turnaround.
Banana Republic hasn't been resonating with consumers for some time.
We've visited Banana Republic numerous times during various quarters to address what's going on with the brand, and it appears that it cannot seem to pull itself out of a miserable cycle.
"[Banana Republic] remains very challenged with a big miss," UBS analysts wrote in a note.
UBS noted that "while July is a clearance month and typically not a clear barometer on the consumer, we would have liked to see traffic improvement continue into July - particularly if fashion at core Gap were better," meaning that Banana isn't alone in the fashion struggle..but also that even for a month that's typically characterized by sales, things look bleak.
It's early August, and Banana Republic is already discounting its fall apparel.
But CEO Art Peck knows all to well that it's difficult to wean consumers off of promotions.
In fact, this past May, he likened the process to "a game of chicken."
Wedbush analysts called it like it is in a note, as "ongoing promotional challenges"
Perhaps this year will be colder than last year and thereby fare better for sweaters. Should they not, they're already discounted.
Peck had long positioned spring 2016 to be the major turning point for Gap Inc.
But, as UBS noted, while July is often relegated for throwing everything onto the clearance rack (or many racks, in Banana Republic's case) it also suggests that a lot didn't resonate with consumers this spring and summer. In fact, some of the sweaters on the rack seem to serve as evidence that it still hasn't rid itself of its troubled winter season.
"To my mind, there are three issues: ease, inspiration, and image," Neil Saunders, CEO of consulting firm Conlumino wrote in an email to Business Insider in June.
In fact, earlier this year, the company tried to appeal to how consumers want their fashion faster. In an ostensible attempt to compete with fast-fashion retailers like Zara, Banana Republic is launched a program during this past February's Fashion Week wherein consumers were able to purchase the clothes they saw on the runway immediately. Up until then, they had to wait until the fall or late summer at the earliest.
And to make things even more difficult for a traditional retailer like Banana Republic, young consumers' beloved fast fashion brands have been launching more upscale offshoot lines so that consumers can grow up with them. Why go to Banana Republic when Zara or Topshop has a capsule collection? Or if H&M is selling a Balmain collaboration?
Fortunately for Banana Republic, it's fair to say that there are probably some looks that resonate with its consumers, like the mysteriously sparse of rack of dresses below (it's unclear if it's flying off the rack or if that rack was mistakenly rolled out onto the floor), or classic blazers and simple, colorful dresses - as Peck has put it before, "updated classics with a twist."
Further, it's just a matter of whether it can sell apparel that consumers that will get them to pay full price...let alone step in the store and make a purchase at all
"Given the product acceptance challenges at Banana Republic we expect problems will persist for at least another couple of quarters," Moody's analyst Mickey Chadha wrote in a note.
Gap Inc. reports its second quarter earnings on August 18.