Grim for Gap as sales slump

AMERICAN clothing giant Gap is losing its cool after sales slumped dramatically during the Christmas period at its 3,800 stores worldwide. The company, which has 133 shops in Britain, has seen sales decline for 20 months consecutively. The company's global sales figures for December, due out on Thursday, are expected to show a 24% year-on-year drop following a series of design mistakes.

Investors are losing confidence too. Gap Inc's bonds are trading at junk levels and analysts say the retailer may soon lose its investment-grade credit rating. Gap was once the epitome of cool, the place to buy casual basics like jeans and sweatshirts. But a move into trendier styles such as turquoise leather jackets proved a turn-off, particularly among younger shoppers. 'We lost focus in the brand,' admitted a Gap UK spokeswoman.

'We were too swept away by trends and lost consistency. Now our main priority is to get the designs right and keep to the fundamentals like making the stores easy places to shop,' she added. 'We're confident we will get our momentum back.'

While the figures include sales at Gap's American businesses Old Navy and Banana Republic, some in the industry believe Gap's experience is similar to that of Marks & Spencer. Many fashion retailers suffered from an exceptionally warm autumn and a slowdown in sales following 11 September. But Gap's problems go further. Some analysts think the chinos and T-shirt retailer is losing some of its British customers to discount stores like Matalan and middle-market retailers such as Next. Even M&S's reviving fortunes could be taking market share from Gap as it struggles to redefine itself.

The spring collection will reach stores in a fortnight, featuring jeans with leaner legs, well-fitting twill trousers and T-shirts with a vintage look. But whether a return to basics will be enough to lure customers back to the stores in sufficient quantities remains to be seen. Having lost its cutting edge it may take more than a nip and tuck to get Gap back on track.

Meanwhile, Japan's biggest clothing brand Uniqlo - often called Japan's Gap - is in trouble after 14 years of accelerating growth. Shares in Fast Retailing, the company that owns Uniqlo, collapsed by 2,000 yen, or 16%, on the Tokyo Stock exchange today as it warned of falling profits. Uniqlo broke into the UK market for the first time last year.