Banana Republic is on the wrong side of Millennials
Steve’s breakdown: And speaking of reports, another one came out telling a very sad story about Banana Republic. RBC Capital Markets asked about 505 Millennials and non-Millennials, primarily female, how willing they were to shop a list of 28 specialty apparel retailers. BR is in very sad shape.
SAN FRANCISCO, CA: Wow. Penny-pinching Millennials really don’t like the often pricey Banana Republic.
A new study from RBC Capital Markets asked about 505 Millennials and non-Millennials, primarily female, how willing they were to shop a list of 28 specialty apparel retailers ranging from fast-fashion house Forever 21 to teen apparel destination Abercrombie & Fitch (ANF) .
Banana Republic put up some putrid metrics, with 48% of Millennials polled saying they disliked the chain compared to 22% who liked it. The inability of Banana Republic to tap into such a large youthful audience may be a key reason why sales trends at the division have been so dreadful.
Same-store sales at Banana Republic plunged 10% in August, worse than Wall Street estimates for a 7.6% decline. Banana Republic’s sales have now fallen for an astonishing 18 straight months, according to the company.
“Our take is that traffic stabilization at this brand will be extremely hard to achieve given multiple years of fashion misses and pricing architecture issues. We think repairing Banana Republic will be a longer battle,” wrote RBC Capital Markets analyst Brian Tunick.
Banana Republic didn’t score points with non-Millennials, either. According to the study, 53% of non-Millennials surveyed disliked Banana Republic vs. 18% that viewed the brand favorably. The older, non-Millennial audience was more willing to shop traditional retailers, such as Kohl’s(KSS) , J.C. Penney (JCP) , Macy’s (M) , TJX’s (TJX) T.J. Maxx, Ross Stores (ROST) and Burlington (BURL) .
Tunick goes onto point out that 75% of respondents to the survey indicated they “never” shop Banana Republic. Talk about embarrassing. The survey results calls into question whether Gap should consider unloading the struggling Banana Republic chain altogether.
Meanwhile, the Gap and Old Navy divisions fared better among those surveyed. About 40% of Millennials dislike the Gap division compared to 35% that like it, while 39% of non-Millennials hated the brand vs. 29% that viewed it favorably. Old Navy was the clear winner, with 53% of Millennials liking the brand vs. 23% disliking it. Non-Millennials were OK with shopping at Old Navy, too, with 45% viewing the brand favorably and 31% not liking it.
Tunick said, “Millennials and non-Millennials are willing to view Gap as a fashion resource, while Millennials in particular appear to be drawn to Old Navy’s value positioning.” The analyst added Gap’s turnaround will likely be a “slow-going process.”
With Gap’s shares down about 26% over the past year compared to an 11% gain for the S&P 500, the company will need to better cater to the demands of Millennials (good prices on relevant styles) in order to improve its future prospects. If it doesn’t, look out below.