Gap Inc. definitely didn’t get what it wanted for Christmas. Instead, it got the cold shoulder from shoppers. Even its strongest brand, Old Navy, posted disappointing results, making experts wonder what the future holds for the one of the biggest apparel companies in the world.

“Although we are encouraged by [Gap Inc.’s] supply-chain initiatives and best-in-class omni-channel platform… unless the company can show consistency driven by Gap and Banana Republic brand turnarounds, along with sustained comp outperformance at Old Navy, we will not get material upside from longer-term initiatives,” according to a recent research note issued by RBC Capital Markets’ retail analyst Brian Tunick.

Apparel retailers cheated out of a season

Gap Inc.’s same-store sales for December 2015—the five-week period ending January 2, 2016—down 5 percent versus 1 percent increase last year. On a brand basis, Gap was down 2 percent versus negative 5 percent last year, Banana Republic decreased 9 percent versus flat last year, and Old Navy posted negative 7 percent versus positive 8 percent last year.

Most apparel retailers had a horrible holiday season, says Garrick Brown, vice president of retail research, Americas, for real estate services firm Cushman & Wakefield. While e-commerce certainly impacted traffic at bricks-and-mortar stores, he attributes the dismal performance in the apparel sector to three key elements: frugal shoppers, skinnier margins and warm weather.

“Consumers haven’t gone back to their old spending patterns—they’ve remained in frugality mode,” Brown says. That means they research the best deals, which forces retailers to discount product, which in turn, erodes margins.

“Price points just haven’t bounced back,” Brown adds. “It’s all about cheap chic.”

And then there was the unseasonably warm weather leading up to Christmas. Apparel retailers generate a large portion of their sales on cold-weather gear, in the Northeast in particular. (It was in the 60s in New York on Christmas Day).

“The warm weather really impacted these apparel retailers,” Brown notes. “In a way, they got cheated out of an entire season because they didn’t see much traffic in their stores until just a couple of days before Christmas and the week after Christmas, and by then, everything was heavily discounted, and their margins got wiped out.”

Merchandising missteps at Gap and Banana Republic

For Gap Inc., specifically, CEO Art Peck admitted during the company’s third quarter earnings call that it had made some serious mistakes with merchandising that impacted performance. “Q3 was challenging for Gap and Banana,” he said. “And again, largely due to the acceptance in women’s product, which is not where we wanted it to be. Let me make something very clear. We know what the issues are with our products and we’re addressing those pretty systematically.”

In the earnings call, Peck promised: “As we get into spring of next year, we’re going to see a material improvement across both Banana and Gap, and the product that we’re putting in front of our customers.”

Despite Peck’s assurances, many question the company’s viability.

“Gap and Banana Republic are brands that appeal to GenXers, not Millennials,” says one expert who asked to be quoted anonymously because he works with Gap Inc. “And I don’t think the company is doing a good job providing merchandise that appeals to GenXers. It’s too homogenous, and frankly, I think shoppers are bored and uninterested in the selections.”

In June 2015, Gap Inc. announced the “strategic” closure of 175 Gap stores in North America over the next few years. The company’s recent results will likely translate into even more closures, particularly with Gap and Banana Republic, according to Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consultancy and investment banking firm headquartered in New York City.

“The whole apparel sector is closing stores, and Gap is no different,” Davidowitz says. “A lot of the malls they’re in are no good, and the stores are oversized, so we’re going to see more closings, mostly B malls. And most of the closings will be Gap and Banana Republic.”

Davidowitz thinks Gap and Banana Republic stores in secondary and tertiary markets could be in danger of closing as well. “When the company opened those stores, they saw potential, and maybe they were okay in the beginning,” he says. “But those stores have not met expectations—they’ve not lived up to their potential—so they’re going to be on the closure list.”

Old Navy falters

Old Navy has been Gap Inc.’s star performer for the past several quarters, but now it looks like it’s in trouble as well, and not for the first time.

“Old Navy has had trouble in the past and closed a ton of stores,” Davidowitz says. “Recently, they’ve been a good performer, but they lost their president [Stefan Larsson], and I wouldn’t be surprised to see some Old Navy closures. There are too many, they’re too big and there’s too much competition.”

During Gap Inc.’s third quarter earnings call, Peck said that the company is “lifting processes and capabilities from Old Navy and installing them in Gap and Banana Republic.” In addition, he said that he’s “confident in the momentum of the business at Old Navy.”

That confidence seems misplaced, given Old Navy’s dismal holiday performance, says the expert who preferred to remain anonymous. “Old Navy has been the only bright spot for years, and to see it falter… well, that’s really concerning,” he says. “A lot of people have blamed decreased mall traffic for weakness with Gap and Banana Republic, but the vast majority of Old Navy stores are not in malls, so why is traffic decreasing there?”

RBC Capital Markets’ Tunick noted that the “falloff at Old Navy was attributed to marketing misfires (‘too chatty’ TV commercials vs. value-focused) and a promotional peer group which made it harder to stand out.”

But Tunick and Brown see some bright spots with Gap Inc., specifically the company’s exposure to the athleisure category with Athleta. “As a category, active wear is very hot,” Brown notes.

According to RBC Capital Markets’ recent store openings report, Athleta plans to open nearly 50 new stores over the next 24 months. Currently, the chain operates 46 stores in the United States.

Davidowitz agrees that Athleta is an opportunity for Gap Inc. “The company will want to give it a chance,” he says.