I will be the first to admit that I shopped quite a bit at Banana Republic...I did...like 10 years ago. You wouldn't catch me in any of the Gap stores today.
The Globe and Mail published a great article on the decline of the American brand, where it went wrong and how it is losing out to its competitors.
Summary? Not listening to the needs of its customers. Times change, so do styles. Isn't that obvious? Apparently not to the Gap who is losing out to A&F, American Eagle and the like.
What can they do to resurrect themselves from the near-dead? Lots. New designers, new marketing...how about giving up on the hollywood stars sporting their gear and get connected back to where they started...back to '69 when they were one with their community. When they understood their community.
PS. While you are revamping you might want to deal with your image re: slave labour.