The decision forms part of a longer-term strategy to boost the Gap Inc-owned brand’s overall business performance after more than a year of disappointing sales.
“After a thorough evaluation process, the company has decided to close eight Banana Republic stores in the United Kingdom,” a company spokeswoman told BoF.
The majority of the eight stores will close by the end of its 2016 fiscal year, she continued, adding that the measures were part of a broader strategy outlined in early May to improve the company’s performance in the long-term.
Banana Republic is in the process of converting some of its full-line stores in New York into outlet stores, according to media reports, and the company says it expects to concentrate its efforts on “markets most favourable to the brand’s growth.”
In total, Gap Inc expects to close about 75 stores across the globe in relation to these measures.
"In the broader context, very generally and bluntly, Gap hasn't been doing so well as a entire operating unit for a couple of years. And Banana Republic has been a sharper thorn in their side,” says Tiffany Hogan, senior analyst US apparel at Kantar Retail.
"I think [Banana Republic] has been a style hit-and-miss and they haven't really been able to get that right over the past couple of years," explains Hogan. "They have had a few management changes and nothing seems to be working. They had some fit issues which were pretty significant a couple of years ago ... Just in general, even in the US, they are not doing all that great."
"The main issue is that Banana Republic’s proportion isn’t working. This is true globally, but is especially acute in the UK where the business is small and doesn’t benefit from the volume that it does within the US," says Neil Saunders, managing director of retail research agency and consulting firm Columino.
"The assortment [of clothes] is at the heart of Banana’s issues and symbolises a brand that has lost its way. Customers are confused and, of course, increasingly unwilling to pay the premium that Banana once commanded. As a consequence the brand is falling into exactly the same trap as Gap as it resorts to discounting and deals to shift merchandise," he tells BoF.
In August, Banana Republic reported a fall of 9 percent in comparable sales for the second quarter of 2016. It was the sixth straight quarter that sales have fallen, and had worsened compared to last year’s decline of 4 percent.
In September, the company appointed Olivia Palermo as its first women’s global style ambassador, an effort to address some of the challenges it has faced in recent years, including over-diversified product offerings and increased competition.
The poor sales come at a time when parent company Gap is attempting to revive many of its businesses by shuttering some overseas stores, monitoring inventories and reducing production times. Gap has also forecast that its full year profit for this financial year would fall below analyst estimates, partly due to falling sales at Banana Republic.
"I think they have taken the view that in the UK, they might as well cut their losses as Banana is not that big a part of the mix and it is not worth putting in too much effort to revive it. This will also allow them to focus all of their efforts on brining back Gap," says Saunders.
Banana Republic has more than 650 company-operated stores in North America, Japan and Europe, and more than 100-franchise operated shops in 20 countries globally.
"Only time will tell if they can really find their niche in the market. I think that's kind of the issue for a lot of brands that compete at Gap and Banana Republic's kind of level of business," says Hogan.
"When you have competitors like Zara and H&M and Mango that can turn out fast fashion with pretty much equivalent or seemingly equivalent quality at a lower price, it becomes very difficult to see what the proposition is. So I think they are going to have to try really hard to try to find their voice in the market."
Editor's Note: An earlier version of this article misstated that Banana Republic would close 75 stores. This is incorrect. Its parent company Gap Inc will close 75 stores.