Gap: swinger through the wringer

Gap has sent its chief executive Art Peck packing. His departure after just four-and-a-half years should come as no surprise. Mr Peck is just the latest in a line of executives who tried and failed to help the US apparel retailer recapture the magic of its glory days. He is unlikely to be the last.

Having defined American casual cool in the 1990s (remember those khaki swing ads?), Gap lost its way in the early 2000s. Over the next 15 years, it cycled through two CEOs. Neither had much in the way of fashion retail experience. Under Mr Peck, the company, which also owns Banana Republic and Old Navy, has continued its downward spiral. Like-for-like sales have failed to grow for four consecutive quarters. Operating margins fell to just 8.2 per cent last year, from 9.6 per cent in 2015. The stock has shed 60 per cent of its value under his tenure.

Efforts by Mr Peck to shrink the company’s footprint and cut costs were akin to kicking the can down the road. Neither really addressed the company’s fundamental problems: unappealing clothing and an over-reliance on rampant discounting. Then there are the fashion missteps — like making blazers with armholes not big enough for an average woman.

Still the timing of Mr Peck’s departure is not ideal. It comes just as the all-important holiday shopping season gets underway. His exit also puts in doubt the company’s plans to spin-off the better performing Old Navy brand next year. An expectation this will now be scrapped helped drive down the stock’s share price on Friday.

Like other mid-tier brands such as J.Crew and Abercrombie & Fitch, Gap is being squeezed by cheaper fast fashion chains at one end and premium brands at the other. The rise of social media and fashion blogs means people want the latest style as soon as they see it. This has benefited the likes of Zara which has a nimbler supply chain.

The problem for Gap is that its decline now looks hard to arrest. Whoever ends up replacing Mr Peck will have his or her work cut out. 

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