By David Schepp BBC News Online's North America business reporter

It may look like any other holiday season at the Gap - customers queued-up at registers and oodles of merchandise - but the retail giant is facing real problems.

Gap shares have fallen sharply this autumn

Last month, the San Francisco-based fashion retailer said its sales fell 25% amid a slowing economy, hindered further by the 11 September terror attacks.

Gap, which in recent years has pushed more youthful styles, has left many shoppers cold, leaving some to wonder what has happened to the funky, casual-fashion merchandiser they fell in love with.

In an effort to woo customers back during the holiday season, Gap has slashed prices, passed out coupons and boosted advertising.

But analysts question whether this has been enough to breathe life back into the Gap.

Holiday sales

"I haven't gotten anymore positive on Gap, I'll tell you that," says Lauri Brunner, analyst with RBC Capital.

"The merchandise we've seen over the last two weeks isn't inspiring," she says. "We think it looks terrible."

But merchandise that fails to inspire customers is just the beginning of Gap's woes.

It is also suffering from new entrants into the fashion retailing business, including Wisconsin-based Kohl's and Sweden's Hennes & Mauritz (H&M), both of which have seen huge increases in sales.

H&M, for example, saw its sales rise 22% in November - almost as much as Gap's fell.

H&M, the world's biggest fashion retailer, can credit a fresh concept in an otherwise staid retail environment for some of its success.

Looking for value

While some shoppers are looking for fresh fashions, others are in search of value and have latched onto department store discounters such as Target and Wal-Mart, where they get a good deal on clothes and other household items.

"In the current [economic] environment, it's the discounters that have gained favour at the expense of a number specialty apparel retailers," says Frank Badillo, analyst at Retail Forward, a market-research firm.

The equation changed about a year and a half ago, when consumers, sensing challenging economic times ahead, began to cut down on clothing purchases.

They shunned boutiques and instead shifted their purchases to mass merchandisers.

Sales at Gap have fallen for the past 20 months.

The retail chain has also cannibalised some of its sales by opening too many new stores. Of the firm's 4,176 stores, over 500 of them were opened in the last year alone.

Plus, Gap also offers much of the same types of clothing at its Old Navy and Banana Republic subsidiaries.

These two brands have eaten into casual-clothing sales at Gap's lower and higher ends, respectively.

The '90s hangover

The expansion by Gap and other specialty retailers in recent years was in response to a boom in consumer spending on clothing, which increased more than other segment of the consumer economy.

Retailers, seeking not to miss out, went on a spree, opening thousands of new stores.

Now, like so many other parts of the US economy, fashion retailers are burdened with over capacity - too many goods chasing too few customers.

Gap can also attribute some of its sales woes to much higher than normal temperatures throughout much of the US.

Many analysts have blamed the unseasonably warm weather for keeping consumer purchasing dormant.

Daft ad campaign

Aside from its mix of clothing and other items, its recent holiday TV ad campaign has been met with consumer apathy.

The campaign features contemporary musicians singing the Supertramp hit Give A Little Bit - but no sign of Gap merchandise.

"Given the mood of the country at the moment, I'm not sure it strikes the right chord," says Retail Forward's Badillo.

The adverts stand in stark contrast to other retailers' advertising - focused on price and goods - possibly striking a false note with value-conscious consumers.

If there is one glimmer of hope for Gap, it is that over 40% of holiday sales happen during the last two weeks of December, according to Dana Telsey, retail analyst at Bear Stearns.

Most people are procrastinators, Ms Telsey says. "The longer they wait, the steeper the markdown."