Clothing retailer Gap Inc today (15 October) revealed it is working on a number of new ideas to try to stem slumping sales at its namesake brand and regain market share, including opening its first store in China next year.

The San Francisco based firm is also planning a return to television advertising in November following a two-year absence, as well as expanding its outlet stores, and launching online businesses in Canada and the United Kingdom in 2010.

It also said it intends to reduce square footage by 10% over the next five years.

The moves, which were unveiled ahead of a presentation to investors, have been spurred by the success of its Old Navy brand this year, where same-store sales rose 13% in September.

Helped by remodelled shops, and a new design team headed by Todd Oldham which has breathed new life into its inexpensive, trendy basics, shoppers are tuning in droves to Old Navy's "fun, family value" message.

The unit has also been the first to show signs of a recovery, with a 4% drop in same-store sales in the second quarter to 1 August a marked improvement on last year's drop of 16%.
 
But its success has highlighted the significant shortfall that still haunts the Gap stores (down 10%), the Banana Republic chain (where same-store sales fell 15%), and in the international unit, where sales dropped 5%.

"Old Navy's performance this year has shown what we can deliver through consistent products, re-invigorated marketing, and an enhanced store environment," said Glenn Murphy, chairman and CEO of Gap Inc.

"With our improved economic model, we're ready to step up our investments and strategies to regain market share and expand our international platform."

Speaking to investors in New York, he added: "We've been looking at the Chinese market for the better part of two to three years, and I think it's the right time.

"The Europeans are represented very strongly through Zara and H&M, the Japanese are represented through Uniqlo, but there's no real significant American presence in terms of branding, product and aesthetics in China. We feel it's a good time for us."

The need for targeted investments comes after two years of cost-cutting at the US' largest specialty clothing retailer, which celebrated its 40th anniversary in August.

While this might have led to better merchandise margins, lower inventory levels and control over costs, critics have also pointed out that new strategies are desperately to stem the retailer's worrying slide in sales and gain back market share.

Second quarter sales across the whole company were down 7.1% to $3.25bn, while total same-store sales fell 8%.

So far at Gap, designer Patrick Robinson is two years into a re-vamp of the division's clothing lines.

It is also attempting to boost sales with a relaunched upmarket denim line called 1969 Premium Jeans, which features new styling and better fits.

And today Marka Hansen, president of Gap North America said the retailer will continue to focus on reinventing key product categories through 2010, such as khakis and pants, in an attempt at "regaining relevance" with customers.

There are also plans to try to breathe new life into Banana Republic, which too is trying to re-connect with its target customer base by moving away from products that were "too heavily work focused," according to brand president Jack Calhoun, and bringing back its affordable luxury message.

He said the team is "working to create a more versatile wardrobe offering for the coming seasons that balances products more evenly across weekend, work and going out occasions."

And at the Gap Inc Direct online division, which nearly doubled its sales to more than $1bn from 2005 to 2008, priorities for 2010 focus on international expansion by offering customers in Canada and the UK the ability to shop online.