California Apparel News

With a new creative director and a new capsule collection for men, the beleaguered Gap brand hopes to shut the door on a period of creative doldrums and sales that were not up to the expectations of parent company Gap Inc., the largest specialty retailer in the world.

San Francisco–based Gap Inc. recently named Hennes & Mauritz (H&M) alum Rebekka Bay as the creative director of the Gap brand and executive vice president of Gap Global Design. She will be in charge of overall creative direction and product direction for the brand’s lines: women’s, men’s, 1969, accessories and Gap Body, which are sold in 1,373 Gap stores across the world. The Danish designer will be the first executive to direct so many categories of Gap brand product since Patrick Robinson, the brand’s former head of design who was ousted in May 2011. Olivia Doyne, a Gap Inc. representative, said Bay has commanded high respect from fashion editors and influencers. “She brings a unique combination of vision, creativity and trend expertise that will help us deliver one global product vision that resonates with our customers around the globe,” Doyne said.

Next up for the company is the highly anticipated limited-edition GQ Collection, which is being sold in Gap stores and online beginning Sept. 27. The collection offers looks from GQ magazine’s six best new menswear designers in America for 2012: Todd Snyder, Saturdays NYC, Ovadia & Sons, Mark McNairy New Amsterdam, Ian Velardi and BLK DNM by Johan Lindeberg.

The Gap’s news comes at a time when Wall Street analysts such as Thomas Filandro of Susquehanna Financial Group regard Gap Inc. in a more positive light. “[We] believe GPS [Gap Inc.] is in the early stages of reinvigorating its brand recognition by meaningful improvements in merchandising and marketing, setting the stage for a multiyear climb in productivity and profitability,” Filandro wrote in an Aug. 16 research note for the New York office of Susquehanna.

Once the dominant brand for basics fashions in malls across America, Gap struggled to regain its commanding prominence in the past 10 years. Troubled by failures of new Gap concepts such as the Fourth & Towne brand, which was shuttered in 2007, and a perceived drop in product innovation, Gap also faced fierce competition from basics brands often inspired by its success, such as J. Crew, Aeropostale, Abercrombie & Fitch, American Apparel and Uniqlo.

In 2006, the company’s net sales totaled nearly $16 billion, but by 2011, net sales had declined to $14.5 billion.

During the past few years, Gap Inc. Chairman and Chief Executive Officer Glenn Murphy sought to change the company’s business by closing domestic stores and expanding overseas. In October 2011, the company announced plans to shutter underperforming stores domestically and expand overseas. In the first half of 2012, it closed 38 Gap stores in the United States and opened nine. By 2013, it is scheduled to whittle the Gap North America store fleet down from the current 1,014 locations to 700 specialty stores and 250 outlet stores. Gap also opened a 10,000-square-foot store on Sept. 13 in the Paseo Interlomas mall outside of Mexico City.

With stores in fashion capitals such as Tokyo, Paris and Milan, Gap intends to increase its store count in Asia, Europe and Latin America. This strategy has yet to meet its potential, said Adrienne Tennant of Janney Capital Markets. Results of Gap Inc.’s second quarter of 2012 were announced Aug. 12. The international division reported a same-store-sales decline of 5 percent during the second quarter, but domestic sales increased. The Gap and sister division Banana Republic both showed same-store-sales increases of 7 percent. Old Navy, the company’s moderate chain, reported a comp increase of 3 percent.

(The remaining brands in Gap’s portfolio are footwear e-tailer Piperlime and activewear brand Athleta. In all, Gap Inc. has a sprawling fleet of 3,285 stores around the world and employs more than 132,000 people.) “The 2012 story should be largely driven by ongoing domestic improvement,” Tennant wrote in an Aug. 17 retail note. “We continue to believe the international component of the business will remain choppy … but we believe that the early signs of a turnaround in the domestic business can successfully offset some of this weakness.”

While other Gap divisions have shown fashion innovation, such as Banana Republic offering its highly successful “Mad Men” collection and employing designer Narciso Rodriguez in an advisory role, change is risky for Gap, said Howard Forman, an associate professor of marketing at California State University, Fullerton. He advised that a rebounding Gap must preserve its classic looks for loyal customers and intrigue new customers with new styles.

Gap must be continually vigilant about style innovation—and pricing, said Mercedes Gonzalez, director of New York–based retail consultants Global Purchasing Companies.

As an example, Uniqlo dazzles consumers with its new fibers and fabrics, she said. The Tokyo-headquartered chain will open a San Francisco store on Oct. 5, and the company plans to open 20 stores annually, according to a company statement. Toronto-headquartered Joe Fresh has gained popularity with its new looks on classics, Gonzalez said, and will be developing boutiques inside JCPenney locations. “The showdown has just begun,” she said. “The winner will have to prove value.”