June 17, 2015
The world didn't end in 2012, but things haven't been the same since then for Gap Inc's flagship clothing chain.
Riding the colored-denim trend that year, the chain's sales soared to their highest in four years as young adults snapped up its distressed, skinny and cropped jeans.
Back then, Gap stores seemed to get everything right, from the colors and assortment of products to their price.
But denim's popularity began to fade in 2013, and the Gap brand's sales followed suit – ultimately leading to the company's announcement on Monday that it would close 175 of its 675 Gap stores over the next few years.
That's a start, analysts said.
Now, in a sense, the Gap division needs to do just the opposite to what it has been doing for the past few years if it is to compete not only with direct rivals such as American Eagle Outfitters , but fast-fashion chains such as H&M , Zara and Forever 21 and big stores such as Macy's .
Instead of relying on basics such as jeans, t-shirts and shorts - which can be bought cheaper just about anywhere - the Gap brand needs to focus more on more-feminine clothing, analysts said.
"Right now what is selling from a fashion perspective is a lot of dresses and a lot of floral and lot of festival-inspired, very feminine looks," said Dan Hess, chief analyst at research firm Merchant Forecast.
"What we are seeing from Gap is very basic and muted colors and it lacks the femininity and the festival-inspired appeal that is selling elsewhere."
Affordable pricing will also be key, analysts said.
"The Gap brand product has lacked clear points of differentiation," Baird Equity Research analyst Mark Altschwager told Reuters. "It has been inconsistent with fashion, fit, quality and value."
The Gap brand, where same-store sales have fallen for six straight quarters, now needs to create its own style as well as stay in tune with what's new on the ramp and on social media sites such as Pinterest, analysts said.
It's not that Gap Inc, which also owns the Old Navy and Banana Republic chains, doesn't recognize the brand's problems, particularly with its assortment.
"I continue to be disappointed, but not surprised, by Gap's performance," Art Peck, the company's chief executive since February, said on a call with analysts in May.
However, he has said that given long lead times for orders it will probably be this holiday season or spring next year before customers see any great changes in offerings.
The company signaled its intent to revamp its assortment in February when Jeff Kirwan, Gap's president since December, hired Wendi Goldman, a former executive at lingerie retailer Victoria's Secret , as its design chief.
"We don't think they have a brand problem," Merchant Forecast's Hess said. "We just think they have a fashion problem. Fashion problems can be fixed."
