Gap Channels Best Quarter With Banana Republic’s Mad Men: Retail

May 29 (Bloomberg) -- Bloomberg’s Josh Lipton reports clothing based on the 1960s “Mad Men” styles of Don Draper and Peggy Olson helped Banana Republic post its best first-quarter sales ever this year. He speaks with Bloomberg’s Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

Clothing based on the 1960s “Mad Men” styles of Don Draper and Peggy Olson helped Banana Republic post its best first-quarter sales ever this year.

Now the Gap Inc. (GPS) brand is teaming up with a name designer - - California’s Trina Turk -- in an attempt to keep the nascent turnaround going.

Banana Republic’s North American same-store sales rose 5 percent in the three months ended April 28, the most in two years, while total revenue at the unit rose 7.4 percent to a first-quarter best of $622 million, according to Gap’s website.

The performance shows that San Francisco-based Gap’s upscale brand may have achieved the right mix of professional and casual apparel. The “Mad Men” line, created with Emmy Award-winning costume designer Janie Bryant, and the Trina Turk clothes are Banana Republic’s first collections with outside designers. The idea is to reach new customers and sell exclusive, limited-run products at full-price.

“Both of these are great co-branding opportunities,” Jennifer Davis, an analyst at Lazard Capital Markets in New York, said in an interview. “Trina Turk and ‘Mad Men’ are brand-appropriate for Banana Republic. It’s smart, their customer relates to it.”

Banana Republic’s rebound buttresses turnarounds at the Old Navy and Gap brands in the U.S., helping drive a 40 percent-plus rally in the shares this year. Earlier this month, Gap reached a more than 10-year high of $29.14.

The new collaborations are part of Banana Republic’s effort to spice up its offerings while maintaining its more standard basics, and something the company is interested in continuing with other partners, Simon Kneen, the division’s creative director, said in an interview in his New York office.

Opposites Attract

“It’s not about bringing things in just to change what we do, it’s actually to enhance and make our own brand feel stronger,” Kneen said. Trina Turk is “almost in a sense the opposite of us a little bit because she’s so much fun. She’s so much more color than we’d ever be, so much more print than we’d ever be, so it’s great to actually work with something that’s very different from who we are.”

Turk, who has her own boutiques and shopping website, is best known for her colorful printed women’s apparel. Nordstrom Inc. and Neiman Marcus Group Inc. are among stores that sell her merchandise, ranging from $338 Henna print strapless dresses to $174 shell print bikinis. The collection will be introduced on June 7 with a pre-sale on Gilt Groupe Inc.’s website, and includes swimwear, towels and dresses.

Cool Factor

While Banana Republic’s sales have yet to return to the $2.72 billion generated in the fiscal year ended Feb. 2, 2008, they’ve recovered from the dip to $2.46 billion two years after that, when the unit offered too much workwear and lost, in Chief Executive Officer Glenn Murphy’s words, “the cool factor, that edgy factor, those special products that Banana Republic is known for.”

In the past year, Gap has boosted the brand’s marketing budget and started opening company-operated and franchise locations overseas, including a store on the Avenue des Champs Elysees, Paris’s most famous shopping street, a vote of confidence that the brand is regaining styles that Murphy says “redefined work” a decade ago.

Gap acquired Banana Republic in 1983 with two stores, when it was a purveyor of safari-themed goods, largely via mail-order catalogs. The brand gained popularity as the dot-com boom of the late 1990s propelled the rise of business-casual apparel. Banana Republic rode that wave by adopting a mix of casual and work- appropriate men’s and women’s clothing from pencil skirts to blazers to cashmere sweaters, targeting fashion-conscious affluent urban professionals.

Lifestyle Brand

Sales were so robust through the 90s that Banana Republic began to see itself as more of an upscale lifestyle brand, and started selling silverware, linens and other home fashion items, a plan that didn’t work out, Richard Jaffe, an analyst at Stifel Nicolaus & Co. in New York, said in a telephone interview. Still, Jaffe says, Banana Republic never lost its niche as a more sophisticated and expensive division of Gap.

In the months leading up to the recession, Banana Republic endured a management shakeup, which put pressure on the brand just as consumers cut back on spending. Meanwhile, the clothes were no longer connecting with core female customers.

At an investor meeting in October 2009, Marni Shapiro, an analyst at Retail Tracker LLC, told management the assortment at Banana Republic was “killing” her. Shapiro asked how the retailer planned to win back once-loyal consumers like herself if it insisted on selling sweaters “appropriate for a 65-, 70- year-old mother,” as well as unappealing colors and fits. The brand needed to “work again,” especially amid stiffer competition, she said.

Resurgent J. Crew

Increasingly, that competition has included department stores such as Macy’s Inc. (M) and Nordstrom and a resurgent J.Crew Group Inc., led by former Gap CEO Mickey Drexler.

In the past two years, Banana Republic has started promoting so-called versatile apparel -- such as dresses that can be worn to work then out with friends, or “desk to dinner,” as Julie Rosen, head of merchandising for the unit, called it at Gap’s October investor meeting. It’s also ramping up its line of men’s suits, which have sold more briskly than women’s office wear.

“You focus on what you do well rather than the things that were distracting you a lot and I think that’s really what we’re doing now with the collection,” Kneen said. “Versatility, that’s at the heart of what we do.”

Banana Republic remains “a work in progress,” and the brand could offer more casual apparel to better compete with J.Crew or Ann Taylor, Lazard’s Davis says.

Jaffe says the brand has successfully refocused on workwear.

“Mad Men has worked. The smart casual look they offer today has fallen into favor,” Jaffe said, citing the success of its women’s dresses. “Banana’s in the right place at the right time. It’s a good brand, a good product mix, well-focused with an opportunity to expand online and internationally.”

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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Source: Banana Republic via Bloomberg

Models wearing Gap Inc.'s Banana Republic "Mad Men" collection pose for a photograph in a handout publicity shot.

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Source: Banana Republic via Bloomberg

Models wearing Gap Inc.'s Banana Republic "Mad Men" collection pose for a photograph in a handout publicity shot. Close

Models wearing Gap Inc.'s Banana Republic "Mad Men" collection pose for a photograph in a handout publicity shot.

Source: Banana Republic via Bloomberg

A model wearing an outfit designed by Trina Turk for Gap Inc.'s Banana Republic poses for a photograph in a handout publicity shot. Close

A model wearing an outfit designed by Trina Turk for Gap Inc.'s Banana Republic poses for a photograph in a handout publicity shot.

Source: Banana Republic via Bloomberg

A model wearing a dress designed by Trina Turk for Gap Inc.'s Banana Republic poses for a photograph in this handout publicity shot. Close

A model wearing a dress designed by Trina Turk for Gap Inc.'s Banana Republic poses for a photograph in this handout publicity shot.

Source: Banana Republic via Bloomberg

Gap Inc.'s Banana Republic advertisement shows a model wearing a dress from the "Mad Men" collection. Close

Gap Inc.'s Banana Republic advertisement shows a model wearing a dress from the "Mad Men" collection.

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