Gap Inc.'s Banana Republic and Gap brands are swiftly losing customers to other brands, according to a report from data management and analytics firm 1010data emailed to Retail Dive. From October 2016 to September 2017, Banana Republic lost 58% of shoppers who had shopped at least once between October 2015 to September 2016, 45% more than in the trailing year, according to the report.
Similarly, Gap lost 54% of shoppers in the past 12 months, up from 40% in the prior year. Old Navy shopper loss has also increased during the same period, but at a lower rate than Banana Republic or Gap, 1010data said. Gap Inc. didn't immediately return Retail Dive's request for input.
More than half of Banana Republic's lost customers shopped neither at Gap nor Old Navy, with many opting for other retailers, including Aritzia, J. Crew and Boden, and helping accelerate sales revenue loss for the overall company, according to the report. Old Navy is also taking sales from Gap, though: 38% of Gap's lost customers shopped at Old Navy. Existing customers (54%) also shopped at Old Navy in 2017, however, while just 19% also shopped at Banana Republic.
With a new strategy unveiled Sept. 6, Gap Inc. is acknowledging Old Navy's strength, and Gap's weaknesses. Earlier this year at the Goldman Sachs 24th Annual Global Retailing Conference, the company announced that Old Navy (along with its much smaller athleisure and workout wear brand, Athleta), would underpin a campaign for "long-term, balanced growth."
"Over the next three years, the company expects to add about 70 net new stores, with the addition of about 270 Old Navy, Athleta and value expressions [outlet stores] across the portfolio, and the closure of about 200 underperforming Gap and Banana Republic specialty locations," the company said in a document released at the time, saying also that executives expect Old Navy to exceed $10 billion and Athleta to exceed $1 billion in net sales in the next few years, driven by growth in online and mobile channels, U.S. store expansion and "continued market share leadership in loyalty categories."
While the future of Banana Republic remains uncertain, the company is hardly throwing in the towel when it comes to its flagship Gap brand, and last month CEO Art Peck said that improvements, especially in Gap's women's denim, have meant fewer discounts in recent months.
"If I dig inside of what's going on, we're seeing good traction in the bottoms business in women's, which is always an important place to see traction with denim really delivering right now," he told analysts in November, according to a transcript from Seeking Alpha. "And our denim platform in Gap is responsive, and so able to put units back into the business. Super solid traction also there in the Active and in the performance lifestyle space. Excellent traction in GapBody."
Gap women's denim in the third quarter saw 13% same-store sales and a 22% gross margin comp, he also said. "Those are really nice numbers. And, again, they happened for a lot of reasons. But part of the reason they happened is because we're increasingly responsive. We're also on trend, we've got good fit, good quality, et cetera."
In light of that emerging strength, Gap has an opportunity to leverage e-commerce to make up for lost sales from closed stores, 1010data said. "Online sales are the true growth opportunity for Gap, accounting for 20% of total sales in Q1 2014 and growing to 29% in Q1 2017," according to the report. "If Old Navy is to earn over $10 billion in annual net sales in the near term, opening more brick- and-mortar locations could help since their shoppers seem to prefer that channel. Conversely, as in-store sales for Gap decline, it seems strategic to put more investment into ecommerce for this brand."