Gap likes to say that it does not pay ridiculous golden parachute payments to departing top executives.
Good thing, too, because judging by the rate at which the apparel retailer turns over its C-Suite, it couldn’t afford them anyway.
Since 2021, the company has fired three of its top five executives, including Chief Executive Sonia Syngal, Old Navy President Nancy Green and, most recently, Athleta President Mary Beth Laughton.
And just for good measure, Gap last week eliminated the position of chief growth officer, held by Asheesh Saksena, and said that Chief People Officer Sheila Peters would leave the company at year's end.
Yikes.
Such turmoil should concern investors and shoppers who love Gap's stores, of which there are still plenty. The company generated $15.6 billion in revenue for 2022.
But while the executives have changed, Gap has not solved its overall problems.
Bottom line: The retailer for a long time has not been making timely clothes that people want to buy without a big clearance sale.
Fast Fashion and the Internet Decimate Gap
Hard as this might be to believe now, Gap once stood at the pinnacle of American fashion and pop-culture relevance.
During the 1990s, under CEO Mickey Drexler, the retailer pioneered the basic workplace look of solid-color shirts and khaki pants. Gap enlisted “Sex and the City” actress Sarah Jessica Parker to tout its collections, to great effect.
But like most traditional brick-and-mortar chains, Gap had struggled to develop an online business.
And the Internet was not the company’s only adversary. Fast-fashion retailers like H&M, Zara, and Shein, chains that could quickly develop, sell, and dispose of collections, ran circles around Gap.
Meanwhile, Gap continues to see itself as a prestigious fashion house with large design and merchandising teams that require long lead development times, said Carol Spieckerman, president of the consulting firm Spieckerman Retail.
Combined with a bulky global supply chain, the company was always late and off trend with its clothing, forcing Gap to offer big discounts to get rid of excess inventory, she said.
Revolving Door for Gap Executives
Gap acknowledges as much in its public statements about the departing executives.
Regarding Nancy Green’s departure in April 2022: “As we look to seize Old Navy’s potential … we believe now is the right time to bring in a new leader with the operational rigor and creative vision to execute on the brand’s unique value proposition,” Syngal said in a statement.
That means Green ultimately lacked the operational vigor and creative vision Gap required. (Ironically, Syngal would resign just three months later.)
Last week, Gap was even more blunt about Laughton’s performance: “We believe Athleta has incredible potential, but it has suffered from product-acceptance challenges over the past several quarters,” Interim CEO Bob Martin said in a statement.
“Product-acceptance challenges” means consumers are not buying the clothing.
Given the enormous turnover at Gap, one has to wonder whether its problems are beyond any one executive to fix. After all, the departed executives were all experienced leaders and came from both within and outside the company.
(Gap paid nearly $19 million in severance for Laughton, Green, and Syngal, according to documents filed with the Securities and Exchange Commission.)
But one thing that has remained constant is who ultimately controls the Gap: the family of Don and Doris Fisher. The duo founded the retailer in 1969.
The Fisher family, combined with the charitable trusts of which at least one family member serves as trustee, control 42.28% of Gap, according to SEC documents. The next largest shareholder is mutual fund firm Dodge & Cox, which has a 10.3% ownership stake.
Interim CEO Martin, who also serves as chairman, said last week that Gap is “close” to choosing a new chief executive. It’s been eight months since Syngal announced her resignation.
Whomever Gap chooses as CEO, that person must at least consider whether the board and Fisher family are setting up him/her for success.
Or failure.
