Photograph by Kiyoshi Ota — Bloomberg via Getty Images
By Phil Wahba
February 27, 2015

Gap Inc’s (GPS) namesake brand is in a deep funk again. And the company’s CEO says that a much more inspired women’s wear collection is key to restoring the chain’s health.

Gap’s comparable sales fell 5% last year, compared to a flat performance at sister chain Banana Republic and a 5% jump at value chain Old Navy. Gap has been facing stiff competition from fast fashion stores like H&M and Uniqlo, and basic clothing has become more of a commodity. Add to that mediocre fashion designs and you have an iconic but faltering brand.

In an effort to find its footing again, Gap recently eliminated the role of creative director that had been held by star design consultant Rebekka Bay, whom it had hired just over 2 years earlier after she successfully launched H&M’s upscale Cos brand. Gap also hired a new brand president. Gap Inc CEO Art Peck, who headed the brand a few years ago himself, said on Thursday that fixing Gap brand was his “No. 1 priority.” And that means focusing on improving its women’s wear in particular.

“It starts with righting the women’s business. There’s an esthetic issue, which we’re working on today with urgency,” Peck said, speaking on his first earnings call as CEO this week. Peck replaced longtime CEO Glenn Murphy earlier this month. “We need to have the women’s business hitting on all cylinders in order for the business the performances that we expect.”

Gap also announced on Thursday it had hired former L Brands (LB) executive Wendi Goldman to the newly created role of executive vice president for Gap product design and development. Peck acknowledged she has her work cut out for her.

While women’s denim is showing a bit of improvement, Peck said that Gap is missing the mark fashion wise on tops, particularly wovens and knits, with poor fits and an unappealing esthetic. “She’s just not responding to the product there right now at all,” Peck said, referring to Gap’s female consumers disinterest in the current merchandise.

The problem for Gap is that it has already bought for the spring and summer seasons, so it warned its profit for the brand-new fiscal year will be hit by a “slower turnaround at Gap brand.”

Gap was also the author of its own problems in other ways. Gap was slower than its sister brands to speed up its supply chain, handcuffing it when it comes to responding to fashion hits or misses and reacting to what H&M and Uniqlo do. So Peck is making it a priority to shorten the product calendar at Gap, and is making other changes so it can quickly ramp up production of things are proving to be popular items.

Peck, who was president of Gap North America and its 700 stores from February 2011 to November 2012, pointed to his own experience to prove the Gap brand can strike again. Gap had struggled for a few years, closed 200 stores, but then had a massive home run in 2013 with bright colored jeans and “on-trend” products. Indeed, Peck promised more color and print and patterns later this year.

Gap Inc cannot afford to have its $6.2 billion-a-year namesake brand falter for very long. It generates 38% of the parent company’s sales, and the brand is expanding overseas. Its mens, babies, and Fit lines are doing well. But the biggest category in the Gap brand – women- is not. And that has to change.

“I wish Gap was in a different place,” Peck said.

 

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