Gap Inc.’s new management might find the task of turning around its namesake brand more formidable than it expected.

This story first appeared in the April 23, 2015 issue of WWD. Subscribe Today.

Art Peck, who succeeded Glenn Murphy as chief executive officer of the company in February, and Jeff Kirwan, who took the reins of the Gap brand from Stephen Sunnucks in December, will have a “daunting” challenge on their hands in steering the Gap brand back to growth after what has essentially been a lost decade, according to a research note from Wells Fargo Securities analyst Paul Lejuez.

“While those that look back only a few years might conclude this is a brand that lost its way in 2014 after a strong 2012-13, a look back over 10 years shows this is a brand that has been losing market share and mindshare over a much longer period. Against that backdrop, it may not seem as easy to fix,” Lejuez wrote.

Gap’s square footage in North America shrank 20 percent and its store count fell 30 percent between 2005 and 2014, and that contributed to a drop in sales to $4 billion from $5.4 billion. But it wasn’t a reduction in store count that sent sales down — comparable sales at Gap fell in all but two years, 2012 and 2013, and even the stronger stores remaining “struggled to comp positive, and typically did not,” the report said.

Even in the two years when comps were up, it was average unit retail that produced the increases as traffic declined an estimated 50 percent during the decade, according to Wells Fargo estimates.

Sales productivity has also declined over the decade, dropping 20 percent in the 10 years since 2005 to about $325 a square foot. This, Lejuez noted, “calls into question the overall profitability of the fleet.…Even including [e-commerce], sales productivity is still below $400 a square foot and 7 percent below where it was in 2005.” Wells Fargo estimates that, based on its knowledge of sales productivity in the factory outlet channel, analysts believe that full-price Gap stores are generating “well below” $300 a square foot.

Gap doesn’t disclose the profitability of its brands.

With Old Navy performing well enough to offset the weakness at Gap, Wells Fargo has a “market perform” rating on Gap Inc.’s shares, which rose 0.2 percent to $40.70 in New York Stock Exchange trading Wednesday.

Lejuez credited the company with managing the business well through a “choppy retail environment,” but concluded, “New ceo Art Peck has a laser focus on fixing Gap brand, but they do not seem close to finding the right formula just yet.”