Grim year for Gap

US 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 tomorrow, are expected to show a massive 24 per cent 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 seen as the epitome of cool. It was 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 today. "We were too swept away by trends and lost consistency. We didn't focus on the key items.

"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 other businesses, Old Navy and Banana Republic which only retail in the US, some in the industry believe that Gap is suffering from a similar experience 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 than this. 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 Marks & Spencer's reviving fortunes could be taking a market share away from Gap as it struggles to re-define itself.

The spring collection will reach the stores in a fortnight. Shoppers are promised jeans with leaner legs, well- fitting twill trousers, bomber jackets in denim or khaki twill, trench coats for men and T-shirts with a vintage look.

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. Shoppers at the store in Kensington High Street were not surprised at the group's slump in profits.

Mari McFarlane, 20, from Stratford, said she only bought the "basics" from Gap. "They have limited stuff. I go in all the time but it's always the same look over and over again, it's pretty boring. If you want something more upbeat you're better off going to Top Shop or Selfridge's," she said.

Eliska Kruger, 26, from South Africa, was similarly unimpressed: "It's very standard stuff. There's so much competition and brilliant stuff elsewhere at really good prices."

But Roxanna Ahmed, 28, of High Wycombe, added: "It's not leading fashion but I like it for the basics. It's good for casual clothes like tops and T-shirts."

Comment: Time to tailor outfits
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