Without this key change, Gap continues to struggle to compete against fast fashion brands like Uniqlo and H&M.
Lost somewhere in the recent headlines that The Gap Inc. (GPS) – Get Free Report is axing 1,800 corporate jobs is the fact that the apparel maker’s most important job remains stubbornly vacant.
The company currently lacks a CEO and hasn’t had one since firing Sonia Syngal in July 2022. That was 10 months ago.
“What the heck is going on?” said Patricia Lenkov, founder and president of Agility Search, a boutique executive search firm in New York. In today’s fast-paced environment, 10 months may as well be 10 years, she said.
“No one is minding the ship,” Lenkov said. “Ten months of instability at the top really trickles down.”
Chairman Bob Martin, who’s acting as interim CEO, insisted the retailer was close to hiring a CEO at the beginning of the year. But the company has yet to make an announcement.
The leadership vacuum couldn’t come at a worse time for Gap.
Enduring Hard Times
The apparel maker is struggling to compete against fast fashion companies like Shein, Uniqlo, and H&M. The company has been late to fashion trends, botched rollouts, and often resorts to profit-killing discounts to clear inventory consumers won’t buy at full price. Gap recently announced it will close over 50 Gap and Banana Republic stores this year.
Since 2021, the company has fired three of its top five executives, including Syngal, Old Navy President Nancy Green and, most recently, Athleta President Mary Beth Laughton.
Gap has also made some questionable decisions that violate good corporate governance. In November, the company announced that Richard Dickson, president and chief operating officer of Mattel Inc. (MAT) – Get Free Report, joined its board of directors.
“At Mattel, Dickson leads a portfolio of global brands, overseeing innovation strategy, design and development, brand marketing and franchise management,” the company said in a statement at the time. “Under his leadership, the company developed and launched the Mattel Playbook, a brand-building approach that has been instrumental in driving the turnaround and growth of Mattel’s power brands, including Barbie and Hot Wheels.”
Fast forward to earlier this month when Gap announced that it struck a major deal with — you guessed it — Mattel in which the retailer will create clothing based on brands like Barbie and Hot Wheels.
Lenkov says the deal is “100% conflict of interest.” It comes down to this: as a Gap board director and top Mattel executive, who is Dickson working for? The shareholders of Gap? Or those at Mattel? (Gap did not respond to a request for comment.)
Given Gap’s problems, corporate governance is probably fairly low on its list of priorities. The company is too big, too slow, and really needs a CEO.
Clearing the Way for the Next CEO
Carol Spieckerman, president of Spieckerman Retail consulting firm in Bentonville, Arkansas, thinks Gap might actually be laying the groundwork for its next CEO to hit the ground running.
The 1,800 layoffs at corporate headquarters is meant to streamline operations and quicken decision-making, actions that other retailers have been taking in recent months, Spieckerman said.
But the exits of the leaders of Athleta and Banana Republic suggests that the next CEO might directly oversee those businesses along with the core Gap brand, Spieckerman said.
Gap’s structure as a brand portfolio company was innovative at first, Spieckerman said. But it might have led to dysfunction as Gap, Banana Republic, and Athleta essentially operate in separate silos. A CEO who directly oversees all three brands can find synergies and encourage collaboration among the three brands, she said.
Clock Is Ticking
Spieckerman says it’s possible that Gap has already picked a CEO and has been consulting with him or her to make these changes before the person officially takes the job. Having Martin announce layoffs, store closings, and executive departures also shields the incoming CEO from blowback so the person can start the job with a clean slate.
But ten months is a long time to hire a CEO, Lenkov said. And the more time passes, the less attractive the job will be to top candidates, she said.
“For candidates, the newer the job is, the more exciting it is,” Lenkov said. “But the longer the process drags on, the best candidates will start to question whether the company is capable of making decisions. Gap needs to demonstrate leadership.”