Upheaval at Gap Shows a Need to Reconnect With Its Core Customer

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It’s been a tumultuous time at Gap Inc. Over the past several weeks, the San Francisco-based retail conglomerate, which owns seven brands including Gap, Banana Republic and Old Navy, has seen the departure of three senior executives and the scrapping of a previously announced plan to spin off Old Navy.

The latest exit is marketing chief Alegra O’Hare, who joined the company less than a year ago. A spokesperson for Gap told Adweek that “as we look ahead, we will be redefining the role of the chief marketing officer”—perhaps a hint that the company will join the growing number of companies that have phased out the CMO role. (The spokesperson declined to elaborate on what exactly that statement meant for the future of the CMO role at the company.)

Her departure follows that of Art Peck, Gap’s CEO, who had been with the company for 15 years; Robert Fisher, the company’s non-executive chairman (and the son of Gap’s founders), has stepped in as interim president and CEO. Last week, the company also shared that Gap brand CEO Neil Fiske would be leaving his post.

In the same announcement that detailed Fiske’s departure, Gap Inc. revealed that it was scrapping plans to spin off Old Navy into a separate publicly traded company, which the brand had announced last February.

Jason Goldberg, founder of RetailGeek, said the catalyst for spinning off Old Navy was originally the fact that the store was the standout performer in the Gap Inc. portfolio. “It was getting unfairly penalized in the market because it’s attached to some of these poor performing apparel brands,” he said. “And initially, the market liked that idea. They said, ‘Oh, if we can split this up, then we can own a good stock that’s a thriving performer in the apparel industry.’”

But that idea didn’t have staying power in the new vision for Gap, without Peck and Fiske. And questions have come up about Old Navy, which over the past year hasn’t been performing at the same levels it used to, with comparable sales slipping for the first time in three years. With that, Gap Inc. was forced to confront the fact that spinning off the brand may have been more of a hassle—with more of a cost—than it had bargained for.

“There’s a ton of costs associated with a split-up: Each company has to buy their own IT infrastructure, ecommerce infrastructure and supply chain infrastructure,” Goldberg said. “They started looking at the real math involved in splitting up these companies, and it’s much more expensive than maybe they initially realized when they advocated this. And then worse, it became evident that Old Navy wasn’t exactly outperforming the market either.”

With Gap Inc. remaining intact for now, the focus needs to shift toward building up the Gap brand and identifying who, exactly, the store is for, according to Bob Phibbs, CEO of New York-based consultancy The Retail Doctor.

“I don’t think we know a purpose, I don’t think we know a style, I don’t think we know a fit,” he said. “We don’t really know what Gap stands for still—that’s the challenge.”

The problem, according to Phibbs, is that customers who grew up with Gap in the 1970s and ’80s are now older, and the retailer has worked to keep them while simultaneously also trying to win over younger customers. Instead, he advised, the company should focus on one audience, rather than trying to be something for everyone.

“They do need to really have a force that says, ‘This is who we are,’” he said.

More than just defining its audience, Goldberg added that Gap Inc. needs to rethink what differentiates its brands from one another—not just its competitors. Changing norms around what clothing is acceptable to wear to different occasions have played a role in this.

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