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.
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.
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.
“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.”
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.
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.
“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.”
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.”