Gap shares slide

The stuttering recent performance of clothes retailer Gap continued as it reported a fresh slump in sales at its Old Navy stores in the US.

The news prompted a 14% share price slump which means the company's value has now nearly halved, to $22.9bn, in the past six months.

Industry watchers blamed its problems on what is described as a mistaken strategy in its Old Navy stores of targeting the teenage market.

Old Navy's slide has hit Gap Inc's performance

This was said to have alienated the wealthy twenty and thirty-something market.

The recent decline at Gap also coincides with attacks from anti-globalisation protestors in the US and elsewhere, who have added it to other targeted chains such as McDonalds.

Old Navy slide

Sales at its Gap outlets outside the US also slowed their growth, from "double digits" the year before to "single digits" this time.

In total, Gap profits fell 6% in the second quarter of this year.

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But investors were equally concerned by the warning that sluggish sales and slower traffic at its Old Navy division could lead to lower-than-expected earnings for the rest of the year.

Across the group, like-for-like sales (which excludes new stores or selling space) fell 2%.

Gap has 3,300 stores across the world, operating under brand names such as The Gap, Baby Gap, Gap Kids, Old Navy and Banana Republic.

Teenage error

"This is disappointing because this news is recurring," said Bear Stearns analyst Dana Telsey.

"Clearly we've had a tough and disappointing second quarter," said Millard Drexler, Gap president and chief executive.

The company admitted it may have made a mistake by focusing too much on the teenage market, at the expense of older consumers who may have been driven away from Old Navy stores because of the lack of selection.

Heidi Kunz, chief financial officer at Gap, said: "The teenage business was wonderful, but we didn't want to build a long term business on that market."

Gap in the US has now begun to roll out its Old Navy Collection merchandise, which, with its more refined casual business style, is geared toward an older audience.

The company said it planned to open 130 to 140 new Gap International stores, up from the 120 to 130 previously planned, as well as 150 to 160 new Old Navy stores, up from the 120 to 130 previously planned.

The company said it had increased its store square footage by 32% this year.