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Business

What the hell happened to Gap?




Fisher planned to call the store Pants and Discs, but his wife Doris came up with the winning name: “The Gap”, an abbreviation for generational gap.

The Gap took advantage of the emergence of denim as the go-to look for a generation of young Americans, and then expanded into khakis, t-shirts, tops, hoodies and other basic items. The brand won over everyone from mothers to office workers to celebrities like Sharon Stone, who wore a black Valentino skirt and a fake Gap turtleneck of $ 26 to the 1996 Oscars.
At the time, it was a symbol of cool and informal style. “As ubiquitous as McDonald̵[ads1]7;s, as centrally administered as the former Soviet Union and as American as Mickey Mouse, Gap Inc. has you covered, from cradle to grave,” the New York Times said in 1992.

But sales of the flagship Gap brand have been falling for years, and it has become an afterthought for many American shoppers. The company’s other brands, including Old Navy and Banana Republic, have also struggled.

On Monday, the company announced that CEO Sonia Syngal would resign after less than three years. She will be replaced by an interim CEO while the company searches for a permanent manager.

Here’s what the next CEO will fall into Space (GPS).

Over-expansion and competition

The Gap rode the expansion of suburban malls in the 1980s and 1990s, and became one of the largest malls in the United States. So the fortune has largely been linked to the malls – good news in the 90s, but terrible news now. Shopping malls have quickly lost customers to online shopping and large stores.

Gap said in 2020 that they would close 30% of Gap and Banana Republic stores in North America by 2024 – mostly in malls.

In the decades since the mall’s heyday, Gap fell out of touch with Baby Boomers who grew up on the brand and failed to attract Gen Z and Millennials, who drive fashion trends today, analysts say.

At the same time, brands and retailers such as Levi (LEVI), Goal (TGT) and fast fashion sellers H&M and Zara lured away Gaps denim shopper. Direct-to-consumer brands online have also cut Gap’s audiences.
The Gap is a long way from its heyday.

“When they were good, it just wasn’t the ecosystem of smaller niche players,” said Ken Pilot, a former Gap president and longtime leader of the company. “Gap competed against department stores and killed them.”

Gap also cannibalized its own brand with similar styles at Old Navy and Banana Republic, he added: “It was smart way they expanded their portfolio, but even they created their own form of competition for the Gap brand.”

Gap has tried several strategies to revitalize its flagship brand, including a partnership with Kanye West for a line of Yeezy-branded clothing. But the partnership has not lifted sales meaningfully.

The initiatives “have been piecemeal instead of part of a coherent grand revival plan,” Neil Saunders, an analyst at GlobalData Retail, said in a note to customers on Monday.

In addition, the flagship brand is becoming less and less important to the company. Old Navy and Athleta are the future: Together, they will represent about 70% of Gaps’ total sales by 2023, the company says.

Leadership mistakes

Whoever becomes Gap’s new leader will not be the first of the CEOs to face challenges.

Mickey Drexler, known as the “merchant prince”, was the person who built Gap into a powerhouse in the 1990s. First president of the Gap division and later CEO of the company from 1995, Drexler pushed Gap to expand beyond jeans to khakis and oversaw the creation of the budget chain Old Navy in 1994.

But it was also during Drexler’s period that Gap lost touch with its core customers. It suffered 24 consecutive quarters of sales in the same store towards the end of his reign, and he retired in 2002.
The company then rotated through several CEOs, including previously Disney (HAZE) director Paul Pressler, pharmacy manager Glenn Murphy and Gap veteran Art Peck. Sonia Syngal took over after Peck in 2020.

“The Gaps failure is about the lack of leadership,” said Mark Cohen, director of retail at Columbia University School of Business. “They had a glorious period of growth and popularity, which they redeemed.”

Recently, Gap tried to spin off Old Navy, which is now the company’s largest brand. But it turned the course in 2020 after sales fell.
Since then, the Old Navy has continued to struggle, including with a failed attempt to renew its size to make it more inclusive. The move first won praise, but the brand ended up carrying too many extra small and extra large items and not enough of the more popular medium sizes. In May, the Old Navy said it would repel this strategy.

The Old Navy’s challenges take much longer than expected to be fixed, “said Susan Anderson, an analyst at B. Riley Financial, in a note to customers on Tuesday. “A new set of eyes on the whole company can be good for the brand.”



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