SAN FRANCISCO, United States — Banana Republic, the preppy apparel retailer that’s mired in a sales slump, has identified one of its key strategic errors: The demographic it targets is too narrow.

“Banana Republic has historically been known as a skinny brand,” said Art Peck, chief executive of Gap Inc., which owns the chain — a perception that keeps some potential customers away. Meanwhile, a diversity council that works to weed out bias in the design process flagged another issue to management: The range of colours on apparel items meant to match skin tones was too limited.

These observations have led the retailer to expand both the sizes it offers as well as its palette. The changes are “absolutely about inviting a customer that hasn’t probably shopped at that brand to come in,” Peck said in an interview.

The chain, which has posted three straight quarters of declining same-store sales, is under increasing pressure to turn itself around as Gap prepares to split from the Old Navy discount chain. Banana Republic will join Gap’s namesake brand, sportswear retailer Athleta and a handful of other names in a company that will trade separately from Old Navy. Gap shares have lost about 30 percent this year, compared with a gain of about 20 percent for the S&P 500.

True Hues

Early results are positive for the line of skin-toned body suits and shoes known as True Hues. With more colours such as espresso and biscotti, the assortment has outpaced sales expectations “by double digits,” according to a company spokesman Mark Snyder. The products are available on Banana Republic’s website and will arrive at flagship stores in New York, San Francisco and Chicago in February.

The True Hues line follows a zeitgeist that’s been taking hold in some corners of the fashion industry. In recent years, some brands like shoemaker Christian Louboutin and Rihanna‘s Fenty Beauty have expanded their collection of skin tones to better reflect the population. Historically, “nude” offerings were often limited to beige — with the effect of excluding non-white consumers.

At Banana Republic and other Gap Inc. brands, teams of merchandisers and other employees known as the Color Proud Council help to sketch more diverse products. The Gap brand may also expand its skin-tone inclusive products for its GapBody line of intimates, while Old Navy is working on camisoles and flip flops that reflect different skin tones.

‘Grossly Under-indexed’

Gap Inc. sees a market opportunity for more inclusive sizing, with Peck noting in a presentation to investors that 70 percent of women in the US buy a pants size 14 or above. Right now, the company only sells up to size 16 in its stores. “We’ve grossly under-indexed in this space,” he said.

Both Banana Republic and Gap offer up to a size 20 in some styles online. The company is also looking to extend that up to a size 26, and plans to bring the bigger sizes into physical locations.

The retailer has also been making a broader push to improve the quality of its product and attract a younger customer base.

“The industry is overdue to really embrace the communities in a representative way that we all do business in,” Peck said.

By Jordyn Holman, with assistance from Lisa Wolfson; editors: Anne Riley Moffat, Jonathan Roeder and Rebecca Greenfield.