Fixing Banana Republic is turning out to be Mission Impossible.
And after two years of trying to nurse the once iconic brand of affordable but smart clothing back to health, the well regarded brand president Andi Owen is out of a job, the company said on Tuesday.
One prominent Wall Street analyst even thinks struggling parent company Gap Inc (GPS) should consider shuttering the brand, which he sees as beyond repair, or selling it off to better focus on its overall turnaround.
Like its sister brand Gap, Banana Republic has been working to change its manufacturing model to speed up the time it takes to get from concept to store shelf, emulating the tremendous success Gap Inc’s biggest brand, Old Navy, has had. But that and other efforts have so far been to little avail: on Owen’s 24 month watch, comparable sales fell 21 times. In December, comparable sales fell 7% at BR, in contrast to increases at Gap and Old Navy. And that has clearly tested Gap Inc CEO Art Peck’s patience.
“While these improvements have been important steps forward, we have significant work to do in order to consistently win with customers,” said Peck in a statement. The CEO will oversee BR until Gap Inc finds a replacement for Owen.
Owen, who took over BR two years ago after a successful run overseeing Gap’s outlets division, was simply unable to find a new niche for the brand at a time office apparel is more casual and women are buying trendier apparel at fast fashion chains like Zara. There were plenty of fashion misfires even before her arrival, such as too big a bet on crop tops a couple of years ago, as well too much focus on black and white, and silhouettes Owen once conceded were “oversized and boxy.” In late 2015, a year into her stint, the company was still complaining of “product acceptance challenges.”
Banana Republic made an ill-advised detour into trendier clothes under now-departed designer Marissa Webber (who once had overseen J. Crew’s designs and only last 18 months in her BR job before leaving in October 2015.). The brand hasn’t had a really major hit since its Mad Men collection almost six years ago, an eternity in the fickle world of clothing. All the while, shoppers defected and have shown no sign of returning.
Wall Street analyst Randal Konik of Jefferies thinks Gap Inc would be better off focusing its investments on Old Navy, a lower price brand that nonetheless has a strong identity, and the Gap brand’s nascent recovery, than pouring more blood, sweat and tears into BR, which in a research note on Wednesday he called “unfixable” regardless of who is managing the brand.
“We believe (Gap Inc) management should consider strategic alternatives (including) a potential sale, massively reducing store footprint, or shutting down the brand,” Konik wrote. He added that would help shed light on “Old Navy’s growth engine.”
It’s easy to see the temptation: Gap Inc shares have fallen 41% since hitting their most recent multi-year high in the summer of 2014. And BR has been a drag on overall performance, clouding the success of Old Navy, Konik argues. But he shouldn’t hold his breath. The Fisher family, which founded the company, has a controlling stake in Gap Inc. This idea has been floated in the past and yet Banana is still part of Gap Inc.