Rather than blame all his woes on the economic downturn, Gap chairman and chief executive Glenn Murphy admitted the retailer has made business errors that contributed to a loss of market share for the past five years.

Speaking at a Bank of America’s Conference in New York last week, Murphy said: “The market leader should never lose market share, full stop.”

He said that Gap was working hard to “fix” its North American operation, which was down by double digits across all of its fascias last month.

Murphy said that Banana Republic has been hit harder than other fascias because of its higher-end positioning, but also believes the brand has lost some of its edginess by concentrating too much on officewear.

Old Navy, he said, should be gaining market share in the present climate with its value offer. To do so, the chain is introducing a, “better balance of product and clearer value message”.

He also maintained Old Navy needs to evolve and modernise. “The fact is that we redid a store in 2008 and it’s almost identical to the one launched in 1994. Shame on us,” said Murphy.

Footfall to stores has been a problem across the business. “Traffic or lack thereof has been the Achilles heel of the company in the last few years,” he added. Gap will try to combat that by testing new store types for its brands, which will be launched by the end of its third quarter.

The retailer has not guided on profit expectations for 2009 because of the turbulent economic climate. Murphy said: “Next year will test all companies; we are more battle-tested than most.”

MHE Retail chairman Edward Whitefield agreed that Murphy needs to implement change across the group and said he is “addressing the right elements” to help recover precious market share.

However, Whitefield warned: “The wrong time to be changing a business is in the worst recession in some 50 years.”

Last year, Gap’s sales fell 8 per cent to $14.53bn (£10.31bn). However, as of the beginning of this month it had no debt, providing flexibility to deliver its strategic plans.

Gap’s international and online business grew by $500m (£354.8m) last year, and now accounts for almost 19 per cent of total business. These operations will benefit from strategic investments Gap intends to make in the next year.