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Gap tries branding to boost sales

It's hoped a retro-style campaign for Old Navy will improve downward-trending same-store sales.

Jennifer Reingold, senior writer
February 27, 2009: 2:55 PM ET

NEW YORK (Fortune) -- Does a brand identity really matter when people have turned away from shopping?

Gap Inc. CEO Glenn Murphy sure thinks so. That's why he launched a new advertising campaign for Old Navy Thursday?the same day its parent and the parent of Banana Republic and Gap reported fourth-quarter 2008 earnings down 13%, to $243 million, and same-store sales down a depressing 14%.

Although the numbers showed that the company has done an excellent job keeping costs down, the results also showed that Gap keeps losing market share in all three of its brands, with Banana Republic, once considered a bright spot, down 15% in same-store sales for the quarter.

That news helped send the stock down almost 5%, to $10.76, in early-morning trading today. "They managed to shore up the balance sheet and stabilize the operating results of the business," says Janet Kloppenburg of JJK Research. "But across all brands, we've not seen a meaningful improvement in market share."

Particularly galling for the Gap executives is the poor performance of Old Navy, whose prices should be a solid draw in this recessionary environment. In hopes of getting shoppers back into the store, even though Murphy admits that the chain's product revamp is not yet complete, he has decided to go forward with the new campaign, created by Crispin Porter + Bogusky. It features a group of "Super Modelquins" who talk about their "bodacious booties" and try to recreate the kitschy spirit Old Navy was so successfully cultivated in years past.

The company is also creating a circular that spoofs celebrity magazines, hoping that it will appeal to the target customer?a 25-to-35-year-old woman, usually a mom.

Will it work? One early reaction was not positive. "I don't know who that's supposed to appeal to but it certainly didn't work for anyone I know," says Richard Jaffe, a retail analyst for Stifel, Nicolaus, who rates the stock a "hold." "What have we accomplished here?"

One advantage Gap Inc. has going for it is the fact that it has been in turnaround mode for far longer than other retailers, and will probably not have to cut costs as dramatically as other chains while the recession progresses.

"Even though next year will test all companies in some ways," Murphy said on the call, "in some ways we are more battle-tested than most." Until they can get more customers in the door, however, it may not make much of a difference.  To top of page


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