Behind the spin: Gap

The dilemma: Where have all the good times gone for Gap? In its 1990s heyday, no self-respecting e-trepreneur would be seen meeting his VC partner in the Valley without a pair of Gap's trademark khakis. But in recent years the company has lost its way...

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Last Updated: 09 Oct 2013

The San Francisco-based retailer was admired by mall shoppers and retail insiders as a sassy innovator. But Gap's bubble burst along with the dot.com one. With continually declining sales, lacklustre and confused brand identities (Gap, Old Navy and Banana Republic), fierce high street competition and a corporate culture mired in centralised bureaucratic decision-making, the company has lost its West Coast mojo. Its performance over Christmas was the straw that broke the camel's back, with a 10% drop in takings. The highly public ousting of CEO Paul Pressler quickly followed in January, and the founders' son Robert Fisher has taken on the mantle of interim CEO until a permanent replacement is found to bring about a Gap 2.0.

The spin

Gap's decline has been so relentless that Fisher Jnr has found it easier to simply 'fess up to problems rather than try to spin the group out of its deep hole. His focus is on the promise of an optimistic future, where the creativity has been 'reignited' and the prestige of the Gap brand returned.

The straight talk

Sales and profits at Gap and Old Navy have been in decline since the second half of 2004. The group's latest quarterly results revealed a fall in profit of 35%. Same-store sales fell 7%. The root causes of its financial woes centre on the loss of the creative energy that had made it so successful in the '90s. Fisher's diagnosis was that 'we almost tried to institutionalise creativity'. Pressler (ex-Walt Disney) was blamed for instituting group processes at the expense of creative freedom: decision-making and sourcing became increasingly centralised, stifling the initiative of each brand leader. 'We've become too bureaucratic and overly analytical,' said Fisher. 'That's not appealing to the people in merchandising and design.' How to fix it? 'I really think we've got to return to our creative roots. That doesn't mean we're not going to be fiscally disciplined. We can do both.'

The verdict

The search for a new CEO continues. In the meantime, Fisher is busy replacing senior management in an effort to refocus and reinvigorate a once sparkling retailer. Will Gap's 40th birthday in 2009 be something to celebrate or the culmination of a mid-life crisis? We'll have to wait and see.

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