Gap Inc. has a major problem.
The trouble isn’t just that customers are buying less—it’s that they’re abandoning the brand altogether.
According to a new report from Morgan Stanley, Gap has ceded around half its market share since 2000, losing shoppers to low-price fashion chains like Uniqlo and TJ Maxx.
It’s not just Gap’s namesake stores that are struggling. At the company’s Banana Republic chain, executives made a mistake in trying to retool the brand as a forward-thinking fashion shop, rather than sticking to its classic aesthetic, Gap Inc. CEO Arthur Peck admitted in a February call with investors.
Even Old Navy, Gap’s one bright spot—the business is described by analysts as the armor fortifying the company’s gross margins since 2013—is now showing signs of deterioration. Competition is one culprit, but so are problems of the company’s own doing, like style missteps that kept items from flying off the racks.
“[O]ne of the bigger style misses of last year was tops went to a silhouette that was a little bit shorter and a little boxier and many women voted that it wasn’t very feminine and wasn’t very flattering,” Peck said in February.
So 2016 is going to be a big year as investors are looking to the company to prove its brands are viable, especially when competing against low-cost fashion peers. That’s been the emerging narrative in fashion retail, where off-price companies with fast-moving merchandise, such as H&M and Ross, are finding success while slower brands and department stores are left lagging.
“Notably, data show that many retailers struggle to bounce back following such entrenchment,” Morgan Stanley’s analysts wrote.
For Gap, the uphill battle will be hardest with the customers who have the most years left to give as loyal shoppers: young people.