The Gap, with a past-its-prime whiff circling the brand, is now leaderless.
Jeff Kirwan, president and CEO of the Gap brand, who joined the retailer in 2014, is stepping down.
Gap Inc. CEO Art Peck, who’s said the flagship will take a back seat to growth formats Old Navy, its value priced fast-fashion spin-off, and athleisure chain Athleta, said the mature Gap chain needs a leader who can jump start profit-margin growth.
“While I am pleased with our progress in brand health and product quality, we have not achieved the operational excellence and accelerated profit growth that we know is possible at Gap brand,” Peck said in a statement.
"As we move into the brand’s next phase of development, Jeff and I agreed it was an appropriate time for a change in leadership.”
The company set plans in September 2017 to shutter about 200 underperforming Gap and Banana Republic stores while adding about 270 Old Navy and Athleta locations, reprioritizing the business for “long term, balanced growth, “the company said in a statement then.
The moves reflect a strategy to nurture Old Navy and Athleta by pivoting “to where customers are shopping" —strip centers, lifestyle centers — and away from floundering enclosed malls, where Gap and Banana Republic stores are based, Peck said during a Goldman Sachs conference call in September.
The 49-year old Gap, which put casual dressing on the map, as its khakis and unisex striped tops became America’s uniform, has suffered fashion missteps for much of the aughts.
Its stripped-down, basic looks have largely left shoppers cold amid the rise of fast-fashion chains like Forever 21 and Zara that offer runway knockoffs for a bargain, and off-price retailers like T.J. Maxx, with their racks of designer fare for less.
While Gap Inc. has turned a corner, posting four consecutive quarters of comp-store sales growth, the Gap brand posted comp-store sales declines for three of those four quarters, eking out a 1% increase in the most recent quarter ended Nov. 2017.
The Gap is “a brand that has gone bland,” said Erich Joachimsthaler, CEO of Vivaldi, a global brand strategy consulting firm that counts brands such as Hugo Boss, Adidas and Reebok as clients.
Retailers playing in the basic-apparel space must evaluate that strategy in the current retail climate amid commoditization, Joachimsthaler said.
“There is an oversupply of basics by competitors like Uniqlo or the Amazon private labels with a better business model,” he said. “Trying to compete against them is as hard as pressing water out of a stone.”
At this stage, the Gap is ripe for radical change, he said. It “needs to take risks with an entirely new approach to the category, or else the category punishes The Gap into certain demise.”
The retailer might look to Burberry, Weight Watchers and Adidas, disparate brands that managed revivals by courting Millennials, forging untraditional partnerships, tapping social media marketing, and collaborating with iconic cultural figures like Oprah.
Burberry, for one, “made the trench coat cool again with global Millennials but they did it with a digital transformation and social media investment that was unparalleled in the industry,” he said.
Meanwhile, Weight Watchers brought in Oprah and “a new CEO that changed the playbook of how to market weight loss. The stock went from $6 to over $74 now,” Joachimsthaler said.
And Adidas upped its game to compete in the athleisure space by shifting its U.S. market-focus to cities, as well as “developing operational speed, and collaborating in new ways with artists [such as] Kanye West, and Pharrell Williams.”
As for the Gap, there’s still equity to be plumbed from the brand, he said. “I don’t think they should give up.”
