What Gap Needs to Do Now

With the CEO out, the chain is hunting a new chief and a new direction. Here's what various experts advise

by Helen Walters

January was a brutal month for executives at embattled retail giant Gap (GPS). The New Year brought confirmation that it hadn't been a merry holiday season at all (see BusinessWeek.com, 1/5/07, "Sales Gap at the Gap"): In December, same-store sales fell 8% compared with December, 2005, while net sales for the month were $2.34 billion, down 4% on the previous year.

Then came rumors that Gap might sell off all or part of itself (see BusinessWeek.com, 1/8/07, "Gap on the Block"). And finally, the icing on the January cake, the announcement that Chief Executive Paul Pressler was stepping down (see BusinessWeek.com, 1/23/07, "CEO Wanted: Gap's Search for a Savior").

So now the company is seeking a new chief executive officer (CEO), a position that won't be easy to fill. In the meantime, Robert Fisher, the son of Gap's founder and the company's non-executive board chairman, will serve as president and CEO. While the company searches for a new leader, we searched out experts in retail, trends, and branding to get their recommendations on fixing Gap, in particular its core Gap brand.

Personality Disorder

Gene Pressman, former CEO of upscale retailer Barneyís and co-author of the forthcoming book, Chasing Cool: Standing Out in Today's Cluttered Marketplace, thinks going private could be just the thing. "What they really need is a true merchant who can come in and redirect through his vision and his taste what the merchandise and marketing should be," he says. "But if they went private, then, without scrutiny, they could fix themselves with their own, new leadership. This is not about restructuring. The past CEO did more than a yeoman's job in that area: There's almost no debt and a tremendous amount of cash on hand."

Addressing Gap's merchandise problem will be a top priority for the new CEO. The shelves have displayed everything from classic casual to trendy to professional too many times in the past years, causing consumers to wonder what the brand even stands for. The offerings of other Gap Inc. brands, Banana Republic, Old Navy, and Forth & Towne, have essentially cannibalized Gap's core offering, leaving it with little room to maneuver.

"They've flip-flopped from basics to fashion-forward assortments and back again numerous times over the years," says Robyn Waters, president of RW Trend and former vice-president for trend, design, and product development at Target (TGT). "They need to find a way to offer true classics and current fashion trends. I think there's an opportunity to design a new 'basic deluxe' American wardrobe that would allow customers to define their own sense of style while keeping up with the trends."

Restoring Credibility

"There's always going to be a demand for what Gap supplies," says Andrew Essex, CEO of New York City-based advertising and communications agency Droga5.

"But my goodness, there's got to be a more compelling position than commodified ubiquity and middle-of-the-road competence! Gap needs to remember that consumers define themselves by their brand affiliations. Does anyone consider Gap an ally at the moment? I think they should focus more on what the brand stands for and less on individual items. A pair of black pants just doesn't resonate without some context in which to appreciate them. That said, Gap still has massive reach. If they had an equally massive idea, they could really influence the culture and restore that rapidly dwindling cred. Remember, the pendulum swings both ways."

In addition to the merchandise, the new CEO must focus particularly on the namesake Gap brand.