Case | HBS Case Collection | May 2013 (Revised March 2014)

Gap, Inc., 2000

by John R. Wells and Galen Danskin

Abstract

From humble beginnings as a Levi jeans store, by 2000 Gap, Inc. had grown to become the world's leading specialist clothing retailer. Its CEO, Millard S. Drexler, the "merchant prince," was credited with transforming Gap into a global empire, leading the company through eighteen years of 21% p.a. growth to reach sales of $13.6 billion in 2000. Gap had expanded to 2,848 stores under its three brands: Gap, Banana Republic, and Old Navy, and controlled 6% of U.S. apparel sales. Drexel had also pushed Gap through a global expansion program, and international accounted for 12.5% of total sales in 2000.
But as Gap entered the new millennium, dark clouds were building on the horizon. While sales in 2000 were up nearly 18% over the previous year, operating profits fell by 20%, only the second profit fall since 1984. Gap found itself plagued with concerns about fashion misses, logistics failures, the departure of senior managers, and increased foreign competition. New fast-fashion competition in the form of Inditex, H&M, and Club Monaco threatened Gap's market share both domestically and abroad.
Drexler remained confident of recovery and promised to fix infrastructure problems and recent fashion misses while expanding the high-growth GapBody and BabyGap concepts. Would these changes be enough to keep Gap competitive in a new retail era?

Keywords: strategic change; strategy; fashion; Fashion Industry; competitive strategy; Risk and Uncertainty; Competition; Performance Consistency; Problems and Challenges; Globalized Firms and Management; Business Growth and Maturation; Strategy; Retail Industry; Fashion Industry; Apparel and Accessories Industry; United States;

Citation:

Wells, John R., and Galen Danskin. "Gap, Inc., 2000." Harvard Business School Case 713-508, May 2013. (Revised March 2014.)