The archives of Gap Inc.’s headquarters in San Francisco are a record of past glories. Campaign shots of the 1990s, taken by star photographers such as Annie Leibovitz, featured models such as Naomi Campbell and actresses such as Demi Moore in the Gap uniform of frayed jeans and plain shirts. Lately the retailer has been trying to claw back some of that relief. A campaign last year starring Catseye, a Gen-Z girl group, was more music video than advertisement; Young teenagers soon began copying TikTok, a short-video app.
Symbolic image. (mint)
The marketing blitz is central to a turnaround engineered by Richard Dixon, who took over as chief executive three years ago. They have inherited filth. Gap – which also owns Old Navy (cut-price), Banana Republic (premium) and Athleta (athleisure) – is one of America’s largest apparel companies. But as fast-fashion labels like H&M and Zara grew and e-commerce spread, it became known for dingy stores and uninspired designs. Sales and profits declined. Shoppers wondered: Why go to Gap?
It appears that Mr. Dixon has answered them. This month, Gap reported its eighth consecutive quarter of same-store sales growth. Its share price has increased by more than 125% since he took charge. Mr. Dixon was previously second in charge at toy maker Mattel, where he oversaw the hit “Barbie” movie and helped revive the brand. He is applying the same formula to Gap as well. Brands are stories, says the boss – who, with long curly hair and a string of pearls peeking out of his shirt, looks like the kind of guy who could start a cult. “Somewhere along the way”, he says, “the company lost its story and became a retailer selling stuff.”
The Gap story begins in 1960s San Francisco, when Don and Doris Fisher (whose family still owns a majority stake in the business) opened a store selling Levi’s jeans and records. Under Mickey Drexler, who took over as chief executive in 1995, the retailer went global and added new brands. Its market capitalization reached $67bn in 1999 – almost eight times its value today.
From there, it slipped into irrelevance. The discount racks at outlet stores are piled high with ill-fitting khakis and uninspiring button-downs. When a Gap distribution center burned down in 2016, one analyst called it a blessing in disguise: The stock needed to be cleared somehow. Between Mr. Drexler’s departure in 2002 and Mr. Dixon’s arrival, Gap rotated through six chief executives.
Mr. Dixon’s plan for Gap involves more than cosmetic marketing. He is sorting out its property portfolio, closing some stores but renovating others. The number of customers at its remaining stores has increased in five of the past six months, according to Placer.ai, a data provider.
Online shoppers—who now account for 40% of sales, up from 30% before the pandemic—are also being better served. One of Mr. Dixon’s first actions was to remove discount banners and pop-ups from brands’ homepages. (“There’s promotion that’s gamification,” he says, “and then there’s promotion that’s desperate.”) AI is being used to manage inventory and speed up deliveries. Thanks to automation, nearly 80% of products now pass through Gap warehouses without touching human hands.
Those products have become even more attractive. Gap’s average selling price (amount paid after discounts) has increased, showing that buyers are no longer just shopping for bargains. The company has also ramped up production, allowing it to jump on fast fashion (such as super-baggy “balloon” jeans). Instead of ordering stock nine months before the season, it now buys fabrics early, delaying decisions on dyeing and cutting. At Gap’s namesake label, collaborations with hip labels like Cult Gaia and Doin have attracted a good clientele. There is no harm in the fact that the youth have become crazy about the old-fashioned fashion of the 1990s and have started wearing everything from leggings to jeans.
The change is not complete yet. The Gap still isn’t as cool as it was in the 1990s. Old Navy faces stiff competition from discounters like Nordstrom Rack. Athleta is struggling the most. It never reached the scale of rival Lululemon, which was founded the same year but has eight times the sales. Both are now losing business to athletic upstarts like Vuori and Aloe.
Still, there are plenty of opportunities for growth. Mr. Dixon has an eye for high-margin accessories and beauty. UBS, a bank, sees a gap-sized opening in the market for $25-$60 handbags — cheaper than Coach, more expensive than H&M.
Then there’s what Mr. Dixon calls “fashiontainment.” Old Navy, which is popular with families, has made deals with Marvel and Formula One that allow the retailer to sell T-shirts and hoodies with their logos. But Mr. Dixon has bigger plans in mind. Who, exactly, remains unclear. In January he hired a chief entertainment officer from Paramount, a film producer, and announced the opening of an office on Sunset Boulevard in Los Angeles. For a retailer recovering from a decades-long recession, it may mean reinvention or distraction.
