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

Gap, Inc., 2012

by John R. Wells and Galen Danskin

Abstract

Between 2000 and 2012, Gap, Inc. (Gap) ceded its world leadership position in specialty fashion retailing to Inditex of Spain and H&M of Sweden. These two companies, each less than a quarter of Gap's size in 2000, were now setting the pace in the global mass fashion market, and Gap appeared to be falling ever further behind. In the intervening twelve years, three CEOs had struggled to turn around the fading brand. While several temporary profit boosts appeared to herald a recovery, a sustained rally remained elusive.
Mickey Drexler, Gap's CEO since 1983, who had been responsible for Gap's rise to global prominence, was fired in 2002 after two years of double digit, same-store sales declines and a 75% drop in the stock price. His successor, Paul Pressler, appeared to have engineered a remarkable recovery, but was fired in 2007 after disappointing sales and another slump in profits. His replacement, Glenn Murphy, fresh from a successful turnaround at a Canadian drug-store chain, promised tighter price controls, lower administrative costs, and a leaner, more aggressive Gap, but sales continued to decline over his tenure. After four years of troubles, Murphy brought in former J. Crew President, Tracy Gardner, to consult with the Gap brand and Murphy began a bold program to close one fifth of Gap's North American store base. In 2012, sales had lifted 8%, same-store sales were strongly positive for all of Gap's domestic sub-brands, and the company's share price had lifted nearly 50% from the prior year. After 12 years of poor performance, had Glenn Murphy finally discovered the answers to Gap's problems?

Keywords: strategic change; strategy; fashion; Fashion Industry; multinational; Brands; competition; Competition; Multinational Firms and Management; Performance Improvement; Management Teams; Brands and Branding; Change Management; Retail Industry; Fashion Industry; Apparel and Accessories Industry; Sweden; Spain; United States;

Citation:

Wells, John R., and Galen Danskin. "Gap, Inc., 2012." Harvard Business School Case 713-511, May 2013. (Revised March 2014.)