Gap struggles with young consumer

In a world of GBP170 jeans and trendy urban styles, The Gap is drowning in a sea of cheap denim and outdated khakis. The Gap’s credibility gap widened even further last week, when the apparel retailer slashed its full-year earnings guidance by almost 10%. Though other clothing companies are apt to fall in sympathy with The Gap over the next day or two, The Gap’s problems are very much its own, and not universal. In fact, the Gap’s problem is that it is no longer a destination store for shoppers.

Looking for jeans? Unless you’re over 40 or unconcerned with fashion trends, one could guess that you aren’t shopping at The Gap. One customer group that the company has struggled to win over in recent years is teen-agers. Unfortunately, this quarter’s results offered little hope on that front. In fact, if you’re looking to get away from all the teens hanging around the mall, The Gap is a decent place of refuge. The company’s conservative styles have pushed teens to trendier stores such as American

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Another problem is the flat, tired market for khaki — the company’s big winner a decade ago. The urban stylings of Urban Outfitters, H&M and Zara have left The Gap struggling to find a profitable niche. The Gap’s Banana Republic unit tries to serve this market, but its conservative edge leaves it posting disappointing results more often than not. In the second quarter, that chain’s same-store sales fell by 3%.

Frankly, after a few encouraging quarters it looks as though The Gap has to go back to the drawing board. Management admitted as much when it noted that its summer merchandise failed to resonate with consumers, and that weak sales in August spoke poorly about how well its fall merchandise had caught on. For The Gap to compete and win in the teen and young-adult markets, it needs to completely change its image. But changing an image that took years to cultivate risks losing the core, the older customer who has remained loyal to The Gap throughout its many ups and downs.