Fisher planned to call the store Pants and Discs, but his wife Doris came up with the winning name: “The Gap,” shorthand for generation gap.
But sales at the flagship Gap brand have slumped 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 CEO Sonia Syngal would step down after less than three years. She will be replaced by an interim CEO while the company searches for a permanent leader.
Over-expansion and competition
The Gap rode the expansion of suburban malls in the 1980s and 1990s, becoming one of the largest mall stores in the United States. So its fortunes have largely been tied to those of malls — great news in the ’90s, but awful news now. Malls have been rapidly losing customers to online shopping and big-box stores.
Gap said in 2020 that it would close 30% of its Gap and Banana Republic stores in North America by 2024 — mostly in malls.
Over the decades since the mall-store 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 great, there just wasn’t the ecosystem of smaller, niche players,” said Ken Pilot, a former president of Gap and a longtime executive at the company. “Gap was competing against department stores and killing them.”
Gap also cannibalized its own brand with similar styles at Old Navy and Banana Republic, he added: “It was smart the way they built out their portfolio, but even those created its own form of competition to the Gap brand.”
Its initiatives “have been piecemeal rather than part of a coherent grand plan of reinvigoration,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients Monday.
What’s more, the flagship brand is increasingly less significant to the company. Old Navy and Athleta are its future: Combined, they will represent about 70% of Gap’s total sales by 2023, the company says.
Whoever becomes Gap’s new leader won’t be the first of its CEOs to face challenges.
Mickey Drexler, known as the “merchant prince,” was the person who built Gap into a powerhouse during the 1990s. First the president of the Gap division and later CEO of the company beginning in 1995, Drexler pushed Gap to expand beyond jeans into khakis and oversaw the creation of budget-chain Old Navy in 1994.
“The Gap’s failure is all about its lack of leadership,” said Mark Cohen, the director of retail studies at Columbia University’s business school. “They had a brilliant period of growth and popularity, which they frittered away.”
Old Navy’s “challenges are taking much longer than expected to fix,” said Susan Anderson, an analyst at B. Riley Financial, in a note to clients Tuesday. “A new set of eyes on the entire company could be good for the brand.”