How the Gap went from youth fashion powerhouse in the 90s to pineapple in the hands of CEOs

In 1969, real estate investor Don Fisher opened a store in San Francisco aimed at teenagers and college students, offering Levi’s jeans along with records and tapes.

Fisher planned to call the store Pants and Discs, but his wife Doris came up with the winning name: “The Gap,” short for generation gap.

The Gap capitalized on the rise of denim as the go-to look of a generation of young Americans and then expanded into khakis, t-shirts, tank tops, hoodies and other basics.

The brand won over everyone from moms to office workers and celebrities like Sharon Stone, who wore a black Valentino skirt and a $26 Gap turtleneck at the Oscars in 1996.

At the time it was a symbol of cool and casual style. “As ubiquitous as McDonald’s, as centralized as the former Soviet Union and as American as Mickey Mouse, Gap Inc. covers you from cradle to grave,” said the New York Times in 1992.

But sales of the Gap brand have been down for years and this has become an afterthought for many American shoppers. The company’s other brands, including Old Navy and Banana Republic, also struggled.

On Monday, the company announced that CEO Sonia Syngal would step down after less than three years. She will be replaced by an interim CEO as the company looks for a permanent leader.

Here’s what the next CEO will find at the Gap.

expansion and competition

The Gap followed the expansion of suburban malls in the 1980s and 1990s, becoming one of the largest mall stores in the United States.

So their fortunes are largely tied to those in the malls – great news in the 90s, but bad news now. Malls are rapidly losing customers to online shopping and big-box stores.

The Gap said in 2020 that it would close 30% of its Gap and Banana Republic stores in North America by 2024 — mostly in malls.

Over the decades since the heyday of mall stores, the Gap has lost touch with the Baby Boomers who grew up with the brand and failed to appeal to the Gen Z and Millennials who drive fashion trends today, analysts say.

At the same time, brands and retailers like Levi’s, Target, and fast-fashions like H&M and Zara have attracted Gap’s denim shoppers. Direct-to-consumer online brands have also won over the brand’s audience.

“When they were doing well, there just wasn’t the ecosystem of smaller, niche players,” said Ken Pilot, former Gap president and longtime company executive. “The Gap was competing with department stores and killing them.”

Gap also cannibalized its own brand with similar styles in Old Navy and Banana Republic, he added, “It was smart the way they built their portfolio, but even those created their own form of competition with the Gap brand.”

The Gap tried several strategies to revitalize its core brand, including partnering with Kanye West for a Yeezy-branded clothing line. But the partnership did not significantly increase sales.

Its initiatives “have been piecemeal, and not part of a larger coherent plan for renewal,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients on Monday.

In addition, the main brand is less and less significant for the company. Old Navy and Athleta are its future: combined, they will account for about 70% of the Gap’s total sales by 2023, the company says.

leadership mistakes

Whoever becomes the new leader of the Gap will not be the first of its CEOs to face challenges.

Mickey Drexler, known as the “trading prince,” was the person who turned the Gap into a powerhouse during the 1990s.

First president of the Gap division and later CEO of the company from 1995, Drexler pushed the Gap to expand beyond jeans to khakis and oversaw the creation of Old Navy in 1994.

But it was also during Drexler’s tenure that the Gap lost its connection to its key customers. The company suffered 24 straight quarters of declining same-store sales towards the end of his reign, and he resigned in 2002.

The company then went through several CEOs, including former Disney executive Paul Pressler, drugstore executive Glenn Murphy and Gap veteran Art Peck. Sonia Syngal replaced Peck in 2020.

“The Gap’s failure has everything to do with its lack of leadership,” said Mark Cohen, director of retail studies at Columbia University’s business school. “They had a brilliant period of growth and popularity, which they squandered.”

More recently, Gap tried to spin off Old Navy, which is now the company’s biggest brand. But it changed tack in 2020 after sales dropped.

Since then, Old Navy has continued to struggle, including with a failed attempt to overhaul the scaling to make it more inclusive.

The change initially won praise, but the brand ended up carrying too many extra-small and extra-large items too and not enough of their more popular medium sizes. In May, Old Navy said it would scale back this strategy.

“Old Navy’s challenges are taking much longer than expected to resolve,” Susan Anderson, an analyst at B. Riley Financial, said in a note to clients Tuesday. “A new set of eyes across the company can be good for the brand.”