When writing about Gap, it’s important to clarify that I’m writing about Gap Inc. and not just the retail chain Gap. The distinction is important because Gap Inc., is made up of the following brands:
During Gap Inc.’s earnings call to discuss fourth-quarter sales, the bad news that has plagued the company continued. The company reported a decline in sales across all brands. Sales decreased to $4.24B down from $4.53B a year earlier, and a net loss of $273M or $.75 per share. Gap Inc., also announced that they had fired the CEO of Athleta due to “continued product acceptance challenges.” That’s a professional-sounding way of stating that consumers don’t like anything in Athleta’s stores.
Gap Inc., also announced that eight months after terminating their former CEO, Sonia Syngal, the company has decided to focus on hiring a CEO candidate from outside the company. I recommended this strategy to Gap Inc., instead of selecting Sonia as CEO. I believe the best CEO candidates for Gap Inc., are Calvin McDonald, the CEO of lululemon, or Levi Strauss & Co. CEO Chip Bergh. Note: It is vital that Gap Inc., choose a CEO who understands the company is a mature retailer that is declining. Sonia tried to run Gap Inc., like it was a growth company. Big mistake. Gap Inc. must do better at product selection, accelerate the apparel purchase to store cycle, and become more efficient and flawless at execution in order to have any chance at growth.
Based on the latest results from Gap Inc., it’s time to ask an honest question: Can Gap Inc., be saved? Let’s examine this.
The biggest problem facing Gap Inc., is that the company has lost relevance and they know longer have a story worth listening to. Gap was started in 1969; an eternity for a retailer. Over the last five years, Gap has made a series of decisions related to merchandising and partnerships that resulted in lost sales and decreased store traffic. Gap Inc., is a declining retailer – this is a very dangerous position to be in.
Gap Inc., must get their bloated costs under control. Next, the company must do a better job of selecting and stocking merchandise that customers will want.
I recommend the following:
1. Contact Amazon Web Services (AWS) to discuss the best way for Gap to eliminate their army of IT resources and instead, leverage AWS to reduce costs and improve their technology.
2. Divest GPS Platform Services, Gap Inc’s supply chain division, to Shopify or some other company. I’d rather see Gap Inc., turn to Amazon for most if not all of their supply chain and logistics needs. At a minimum, Gap will reduce their logistics costs by 30% if they leverage Amazon’s 3PL service.
3. Contact Mark Edwards, the CEO and Founder of 345 Global, and leverage 345’s software for store planning, merchandising, supplier collaboration, and most important, creating digital twins. Everyone should follow Mark and 345 Global.
Good luck!
