When Sonia Syngal took over as chief executive officer at Gap Inc. in early 2020, she inherited a business with lagging sales and poor inventory management. Just over 2 1/2 years later, she leaves the company in a similar state.
The owner of Old Navy, Athleta and Banana Republic now must find a leader who can refresh the company across its brands and revive sales while competing with fast-fashion rivals that have reshaped the apparel landscape. That’ll be no easy feat amid the highest US inflation in decades and a pandemic that can change buying patterns on a dime. Add in shares that are down more than 70 per cent in the last 12 months, and it’s clear the new CEO will be entering a uniquely pressure-packed situation.
“Anyone who accepts that role will have to understand that there are a lot of challenges and it’s not going to be an easy turnaround,” said GlobalData’s Neil Saunders.
Syngal’s predecessor, Art Peck, was promoted from within in 2015. He departed in 2019 after failing to produce results. During his tenure, Gap’s namesake brand was hindered by excess inventories, resulting in a firing at the top of that business. That’s a similar to what happened this year at Old Navy, where the top executive departed after a botched expansion of plus-size women’s apparel. The discount chain now has a glut of inventory that will have to be marked down, eroding profit.
Gap could use a fresh pair of eyes and should strongly consider looking outside its ranks for a leader, according to an executive recruiter who asked not to be named in order to speak frankly while preserving professional relationships. The person isn’t involved in the current search. The board has failed on the last two CEOs, who were both internal hires, the person said.
Saunders said Gap has failed to innovate and been “very resistant to change,” pointing to the string of executive departures. Overseeing four distinct brands with their own unique sets of problems also complicates the role, he said, adding that producing merchandise that’s seen as fashionable will be key for turnaround efforts.
KHAKI EMPORIUM
San Francisco-based Gap rose to prominence in the ’90s as America’s go-to khaki emporium. Since then, the namesake chain has struggled to reinvent itself and fast-fashion companies like Forever 21, H&M and Zara have overtaken it as preferred shopping destinations among younger consumers. A partnership with Kanye West, one of the biggest initiatives announced under Syngal, created buzz initially but has yet to generate meaningful results.
Old Navy, which generates more than half of the parent company’s sales, is a central part of Gap’s growth strategy. But a series of cuts to guidance have now cast doubt on that business as well. The new CEO will need to focus on correcting Old Navy’s supply-chain problems, Saunders said.
Morningstar analyst David Swartz said the retailer faces a “tough” CEO search and should consider wooing an executive from the discount-apparel world to draw back the value-driven customers the company has lost. He predicted Old Navy’s problems can be fixed quickly.
“It’s just a matter of selling the unwanted merchandise, like from the plus-size line, and going back to what has made Old Navy what it is,” he said. In contrast, the namesake brand faces a tougher road. “The Gap brand is probably never going to be what it was,” Swartz said.
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