Gap’s Fashion-Backward Moment



At 8:50 on a Wednesday morning, nearly two dozen shoppers hovered in front of H&M’s new global flagship store on the corner of West 34th Street and Avenue of the Americas in Manhattan, eager to get inside as soon as the doors were unlocked at 9.

Directly across the street, a Gap store was also preparing to open. A lone woman stood in front. She was handing out fliers for a Cuban restaurant as pedestrians hurried by.

The contrast summed up the state of American retailing. One by one, iconic brands like Gap, J. Crew, American Apparel and Abercrombie & Fitch have reported slumping sales, while chic and cheap foreign fast-fashion brands like H&M, Uniqlo and Zara are opening bustling stores and luring away customers once devoted to a more basic American style.

American midmarket fashion has lost its way, and no other company epitomizes that as much as Gap. The company announced last week that it would close a quarter of its 675 North American stores over the next few years.

But the closures represent the latest in a decade of stumbles for a brand that was once so cool that the actress Sharon Stone wore one of its turtlenecks, with a Valentino skirt, to the 1996 Oscars. In 1998, its “Khaki Swing” television commercial, all smiles and American optimism, aired to 76 million viewers during the final episode of “Seinfeld.” The brand also became seared in popular consciousness that year as the maker of Monica Lewinsky’s infamous stained blue dress.

In a presentation to investors last week, Art Peck, Gap’s chief executive, spoke somewhat poignantly about the brand’s downward trajectory. When Gap’s latest round of store closures is done, its footprint in the United States will fall to just two-fifths of its peak in 2000.

“We had our moments of glory, but they’re not followed with consistent moments of glory,” Mr. Peck told investors at Gap’s corporate headquarters in San Francisco. “None of us are happy with our performance now.”

Once the master of casual, supplying Americans with staple khakis, denims and button-down shirts, the company is finding that its once-stable American customer base has splintered. Luxury is booming; at the other end of the market, discount retailers like T. J. Maxx and Burlington Stores are seeing robust gains. Gap, Abercrombie and their peers are stuck in the middle.

But they have also faltered at a game they once dominated: being the go-to destination for the legions of teenagers and young adults with money in their pockets and time on their hands. That role has fallen to juggernauts like H&M, based in Sweden, and Zara, owned by the Spanish company Inditex, which turn out cheaper versions of runway trends in weeks. H&M’s 368 stores in the United States, set to grow by 65 this year, get a fresh shipment of styles daily. Uniqlo, owned by the Japanese giant Fast Retailing, is most like Gap in that it sells basics. But Uniqlo markets basics at cheaper price points, in dozens of colors in high-tech fabrics, and offers midprice collections by designers and celebrities, including Jil Sander and Pharrell Williams. The company’s footprint here has grown to 42 stores in four years, and more are planned.

In September, yet another foreign fast-fashion brand is set to land on American shores. Primark, based in Dublin, plans to open 20 locations and will sell items for even less than H&M: Its latest catalog features $8 halter neck dresses and $10 bikinis. American retailers still outnumber the upstarts, but they are locked into outdated formulas.

“Back in the ’80s and ’90s, there wasn’t real access to higher-level fashion,” said Kate Davidson Hudson, co-founder and chief executive of Editorialist, an online fashion magazine. “It was the heyday of business casual, and stores did well selling core staples.”

“But now, everybody sees what’s on the runways on social media and on blogs, and everybody’s a critic, and shoppers want it as soon as they see it,” she said. “Brands like Gap just feel very dated.”

Sales at Gap stores open for at least a year, a closely watched figure in the retail industry, have fallen for 13 straight months. The company’s upmarket brand, Banana Republic, has also stumbled, though Gap’s cheaper Old Navy label has done well.

At Abercrombie & Fitch, comparable sales have fallen for three straight years and the brand is in the midst of an overhaul, which includes covering up the hunky shirtless male models who functioned as something of a corporate logo. Last week, the brand confirmed that Katia Kuethe, formerly of Lucky magazine, would be its new creative director. Even J. Crew, long a retail darling with a fiercely loyal following, has suffered from an increasingly stale formula of print, sequins and basics. J. Crew announced early this month that it would eliminate 175 jobs and replace the head of women’s design at its namesake brand.

The two-block stretch of 34th Street between Fifth and Seventh Avenues is a time capsule of retail, anchored on one end by the massive century-old Macy’s Herald Square store and increasingly populated by the foreign chains of the moment — Zara, Uniqlo and three H&M stores, including the airy 63,000-square-foot flagship, which opened last month and is, according to a corporate spokeswoman, the largest H&M in the world.

Sprinkled among them along the crowded sidewalks are older, familiar American mall staples like American Eagle, Banana Republic, Old Navy and others, along with Gap.

At a vibrant, three-story Uniqlo, Dhushyanthy Tharan of Hoboken, N.J., shopping on her 26th birthday for a long-sleeve button-down shirt, said she found the selection to be of higher quality and more stylish than at the Gap. “I love their materials, the cotton and linen, and their style,” she said. “It’s very young.”

“I have checked at American Eagle and the Gap,” she added, “but I never really find anything there.”

One of the people waiting for the H&M doors to open was Tianna Robinson, 30, of Brooklyn, who, unsatisfied with her wardrobe choices that morning, planned to pop in to buy a shirt for a business meeting later in the day.

“I know that no matter what,” she said, “I’ll be able to find a shirt that’s presentable and price-worthy. And it’s cute!”

H&M is her “go-to” store, Ms. Robinson said, but she also likes Zara. “Gap,” she added, “I don’t go to as much, to be honest.”

Mr. Peck and his team seemed to suggest to investors last week that Gap and its sister brands would start to emulate their fast-fashion rivals. Gap’s brands will focus on improving the product, they said, and on speeding up the time it takes to get new styles into stores.

“We are looking at what is starting to trend externally, and feeding that into our process very quickly to testing,” said Jeff Kirwan, Gap’s global brand president. “Then if it tests well, and we feel confident in the early results, we’re going to invest more and move on forward.”

But in reality, it will be difficult for Gap and other American brands to catch up to the likes of Zara, for example, which owns garment factories around the world, giving it a measure of control that permits a quick response to emerging trends. That “vertically integrated” setup lets fast-fashion brands constantly deliver new styles to stores, often in small batches. Fast-fashion retailers have come under increased scrutiny, however, for their heavy reliance on low-wage factory workers, many of whom work in dangerous, grueling conditions, as well as for the environmental toll of throwaway fashion.

Nevertheless, it takes far longer for Gap, which does not own any factories, to source new designs and get fresh styles on its racks. The company hired new design chiefs this year, but in a telling sign of just how much it lags in speed and flexibility, Mr. Peck said that their new products would not show up until next spring, because the brand had already bought the bulk of its stock for the rest of this year.

“Vertically integrating your supply chain can take years to accomplish, and tens of hundreds of millions of dollars to implement the right way,” said Andrew Billings, senior manager of the retail and consumer practice at the New York consulting firm North Highland. “That’s not something that’s going to happen overnight.”

That doesn’t mean the process couldn’t be faster. Even without its own factories, a company like Gap could “work with your design team and reduce the number of sample rounds to make quicker decisions,” Mr. Billings said. “They might be able to turn something over in 15 weeks, which would be drastically faster than your typical fashion calendar, which is more around 45 weeks.”

American brands are also saddled with the remnants of a shopping mall culture that is fast vanishing. Many of Gap’s coming store closures are expected to be at malls that have suffered from declining foot traffic and slumping sales. The national retailers that once anchored those malls, like J. C. Penney and Sears, also are floundering, at the same time as e-commerce is picking up steam.

By contrast, the foreign labels setting up shop in the United States are getting their pick of the best real estate, said William Susman, managing director at Threadstone Partners, a New York consumer and retail advisory firm. And overseas retailers, from the start, are used to operating all of their locations as high-traffic, high-grossing flagship stores, he said.

“The mall doesn’t really exist abroad as it does here. You have High Street locations in Europe whose economics really resemble flagship stores,” Mr. Susman said. “They have a very different real estate strategy.”

But most pressing for declining brands, retail specialists say, is bringing a dose of inspiration to an outdated assortment of clothing. At J. Crew, that means fewer fashion faux pas, like its universally panned “Tilly” cropped sweater that wound up on the sale pile. For Abercrombie, that means less reliance on logos to appeal to a generation now tired of blatant brand marketing. For Gap, that means sprucing up what has become a lineup of bland basics with no discernible point of view.

That hasn’t happened yet. The brand appears to be sticking to its basics strategy, albeit in a dizzying array of choices. Gap offers at least 11 categories of women’s jeans: true skinny, slim straight, girlfriend, authentic boyfriend, sexy boyfriend, always skinny, curvy skinny, real straight, perfect boot, long & lean and legging.

“There’s no creative direction, there’s no creative identity, and the shopper can perceive that,” said Ms. Davidson Hudson, of the Editorialist. “Gap needs to say: Here are the two silhouettes that we think are important this season. These are the two we’re standing behind. Here’s your perfect pair.”

Daniel Kulle, president of H&M in the United States, had similar advice for his American rivals. He said that H&M still saw “a huge opportunity to grow, for the next couple of years,” in the United States.

“If you don’t keep constantly updating your fleet, if you don’t have the right trends and collections season after season, your customers are just going to go somewhere else,” Mr. Kulle said in an interview.

“You have to keep your customers curious,” he said. “Then they have to keep coming into your stores to see what’s new today.”

This Woman Could be the Next CEO of Kohl’s



Kohl’s Corp. has named chief customer officerMichelle Gass to the newly created principal officer position of chief merchandising and customer officer, filling the long-vacant chief merchandising officer position as Kohl’s begins a search for chief operating officer, another new position.

This positions Gass, who came to Wisconsin-based Kohl’s in 2013 from Starbucks Corp., to potentially succeed CEO, chairman and president Kevin Mansell down the line. Once appointed, the chief operating officer would also be a possible contender for the top job.

This reshuffling at the top is part of the retailer’s ongoing “Greatness Agenda,” a plan to turn around the company’s stagnant same-store sales and reposition Kohl’s to compete against online retailers such as Amazon, as well as select a successor for Mansell.

In her new position, Gass will oversee all of Kohl’s merchandising, planning and allocation, and product development functions. She will also continue leading Kohl’s overall customer engagement strategy, including the company’s marketing, public relations and social media efforts.

In the interim, Mansell has assumed direct oversight of the company’s digital and e-commerce strategies and operations.

Kohl’s previous chief merchandising officer, Donald Brennan, resigned in April 2014. A Wall Street Journal article at the time foreshadowed the management shakeup to come spurred by Brennan’s departure.

The company’s search for a COO will look outside the company. The role will include direct responsibility for the company’s store operations, logistics and supply chain network, information and digital technology, e-commerce strategy and operations, and store construction and design.

“Kohl’s had previously announced an external search for a new chief merchandising officer. However, during the course of this search, it became apparent that Michelle’s passion for merchandising and new brand acquisition made her the perfect leader for our product and merchandising functions,” said Mansell in a press release. “The close connection between our merchandising and customer engagement strategies has been a key driver in the progress we have made in the early stages of our three-year plan with the goal of becoming the most engaging retailer in America.”

Other longtime leaders at the company (NYSE: KSS) Wes McDonald and Richard Schepp have also been promoted to principal officer positions as chief financial officer and chief administrative officer, respectively.

3 Golden Rules for Managing Employees


Management of employees is at the heart and soul of every organization.  No matter the brilliance of the strategy, it will not work without a motivated and effective workforce.   There is no shortage of management theories and best-selling books on how to succeed through the leadership secrets of Attila the Hun, Abraham Lincoln, Mother Teresa . . . you get the point.  But whether managing a horde, a quarrelsome cabinet or an army of nuns, there are some common denominators.  Here are 3 of the fundamental rules for managing any team:

Develop a Team Feeling

People are happiest when they are part of a larger team who care for each other and are working for a specific goal.   Employees do not want to be treated as collateral, but rather as valued members of your organization who will share in the success of the venture. Go out of your way to ensure that your employees have this feeling and are committed to the success of your venture. It will pay significant dividends long term.

Manage Employees by Objectives

Every employee should know what the responsibilities of the job are and what the measure of success is in that position. Work with your employees to help them grow in the job so they can meet and exceed all objectives.

One of the biggest mistakes businesses make is not placing enough emphasis on the ongoing management and training of employees.   This is done in many ways, such as demonstrating the standards of the organization, sharing knowledge with employees to help them grow and reward them both verbally and financially for the efforts they put in to achieve their objectives.

Delegate and Avoid Micromanaging Employees

One of the cardinal sins of small business is the sense that the owner must know everything and every detail of the organization, and that the employees are simply charged with the execution of the owner’s wishes.   This is not an effective way of running an organization or utilizing either your or your employees’ time very effectively.

By delegating responsibilities in accordance with the capabilities of each person, and then following up to ensure that the tasks have been accomplished you will develop better employees and have more time yourself to build the business by effectively managing the entire operation.

Develop a team feeling, help them understand their objective, delegate and don’t micromanage – good places to start as you develop your management philosophy.

Penney’s Comeback Plan: Home, Shoes, and Omnichannel


While JC Penney is hardly anyone’s idea of a brand ninja, its new CEO says the company’s comeback is all about its associates’ “warrior spirit.”

And in order to meet its financial goal of $1.2 billion in earnings for fiscal 2017, Marvin Ellison, the retailer’s president and CEO-designee, says the company will focus on three essential areas: Reconstructing its battered home-decor business; building the successful “core” categories, including shoes, handbags, accessories, jewelry and Sephora units; and catching up with other retailers in the race to provide consumers with true omnichannel offerings.

“We are behind in omnichannel,” he conceded to investors at the Piper Jaffray Consumer Conference in New York, which was also webcast. “But there’s tremendous second-mover power. And because we had been a catalog company, other retailers are hurrying to build distribution centers, which we already have in place. We are working to find a seamless connection between, both mobile and desktop, and leverage those with our physical stores. There is a huge opportunity for us there.”

Building on strengths in its center-store offerings is also critical, says Ellison, who joined Penney last year from the Home Depot. Sephora units continue to do well, and a new line of Liz Claiborne handbags has been especially strong. A revamped women’s shoe department is scheduled to be in place systemwide by the time back-to-school shopping kicks off. “With the exception of Sephora, the company had lost focus on these areas, but they are great for cross-shopping and incremental sales attachment,” he says.

And finally, he added, the company is determined to repair its home department, arguably the biggest and most expensive departmental disaster of the short and ill-fated regime of Ron Johnson, who was ousted as CEO back in 2013. The departments made an abrupt shift from traditional to modern, with new walls that destroyed sight lines.

“Home was the most disappointing,” added Myron E. (Mike) Ullman III, the company’s current CEO. “We spent millions and did worse.”

What’s been key, Ullman says, is reaffirming the brand’s identity as a value retailer. “We had 87 million active customers in 2011, and we have 87 million today. Our customers did not give up on us. They came back. Why not get them to come more often, focusing on their loyalty?”

“While we’re not as far along as we’d like to be, we’ve made good progress,” Ellison says, with home sales showing the third-highest comparable sales gains in its most recent quarter.

While its most recent quarterly reports show the Plano, Tex.-based retailer is gaining traction in its turnaround, not everyone is convinced. In his recent report on the company, Sterne Agee | CRT analyst Charles Grom writes its improved sales and earnings are a positive development. But, “in a tepid retail environment, we wonder if raising annual guidance just 100 days or so into the fiscal year is the prudent course of action, particularly with a critical fourth quarter still months ahead. All told, we remain uninvolved, and still have our doubts about the viability of the company’s long-term goals.”

Walmart Adjusts the Thermostat to Warm Worker Relations


BENTONVILLE, Ark. — When the weather gets sultry here at company headquarters, Walmart workers everywhere brace for an icy blast.

Because temperatures at Walmart stores across the United States are controlled remotely by the retailer’s centralized systems here, employees stock shelves and tend to customers under conditions that, by many accounts, tend to be on the chilly side from one city to another.

So at an employees’ rally held here on Wednesday ahead of the retail giant’s annual shareholders meeting this week, company executives made one of several concessions by agreeing to raise average store temperatures by 1 degree for the majority of Walmart locations.

From adjusting the air-conditioning to relaxing the dress code and even jazzing up a store’s music, the overtures — however small they seemed — are part of Walmart’s effort to project an image of a more caring employer.

A day earlier, Walmart, the country’s largest private sector employer, said that it would raise the starting hourly wage for more than 100,000 managers in the United States. That was the second wave of wage increases at Walmart this year, after it announced in February that it would raise the pay for a half-million entry-level store workers.

“I love to listen to you, I love hearing what’s working, what isn’t. I want to hear your ideas. I even like to hear your frustrations,” Greg Foran, the head of Walmart’s United States division, told about 3,000 store workers.

“Our job, my job, is to make your life easier,” Mr. Foran said.

Long a target of protests over low wages and rigid work schedules, Walmart is appearing to appease employees in the face of rising competition to hire and retain workers as the job market rebounds. Other retail chains, like Ikea and Gap, have also started to offer higher wages for store employees.

Walmart is also trying to cast off an image as an exploitative employer with an army of minimum-wage workers, some of whom reportedly depend on food stamps or other government aid. Now, after the latest wage increases, all Walmart workers make above the minimum wage, the retailer says.

Walmart also is trying to improve customer service as it struggles with sluggish sales at its supercenters and neighborhood markets.

Sales at stores open for a year or more grew by just 1.1 percent from a year earlier in the first quarter, though its performance over the last few quarters has improved slightly after a period of sales declines.

Not all workers were impressed with the changes. And not all of them were in Bentonville at the company’s invitation.

Cindy Murray was in town with the labor union affiliate, Our Walmart, to speak in support of a resolution the group will be presenting on behalf of an activist investor at Friday’s meeting that calls for giving shareholders the right to nominate board candidates.

Ms. Murray, who said she earned $13.20 as a fitting room clerk at a Walmart store in Laurel, Md., and struggled to pay her medical bills, said the retailer was skirting its workers’ most pressing concerns.

“Anything Walmart does to makes life better for workers is awesome. But these changes are also basic things we need to do our jobs better and sell more,” she said. “Hire more workers and better pay — those are the biggest things. I think they should stop dancing round the boat.”

Kristin Oliver, Walmart’s executive vice president in charge of human resources, acknowledged that workers harbored remaining concerns, and said Walmart was working on more flexible scheduling.

She also said the company hoped that the combination of higher wages and friendlier policies would make its work force less transitory, and more likely to build careers with the retailer.

“What we’ve seen in the last few years is people jumping for small wage increases. People will move from one retailer to another for 25 cents an hour,” Ms. Oliver said. “What we hope is going to happen with the investments we’ve made is to slow that down.”

To entice workers to stay, Walmart on Wednesday announced a number of other changes to its employee policies.

The retailer will ease a much-criticized dress code that had required store workers, even those in physically intensive jobs, to wear shirts, vests and khakis. Now, stockers and other back-of-store workers will be allowed to wear jeans and T-shirts. Service-oriented workers will also be able to expand their choice of pants to black or khaki-colored denim.

On special occasions, like days with sporting events or seasonal holidays, workers will be invited to wear team jerseys, ugly Christmas sweaters or pink shirts to support breast cancer awareness, said Deisha Barnett, a Walmart spokeswoman.

The retailer also said it was bringing back an in-store broadcasting service called Walmart Radio, with a D.J. who broadcasts music to stores, to address numerous complaints from workers about having to listen to the same Justin Bieber and Celine Dion albums all day.

And temperatures at stores in the East and central regions will rise to 75 degrees from 74. (In stores in the West, average temperatures will fall from 76 to 75.)

To acknowledge employees’ complaints, executives at the rally used an imaginary Walmart worker, a puppet they called Willy Sellmore, who offered a surprisingly frank take on the retailer’s policies. When an executive explained that the temperature changes had been discussed for a year, Willy appeared understandably baffled.

“A year? A year? How long does it take to adjust a thermostat?” he said. “This shouldn’t be so hard.”