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Two days before Black Friday, that late-November day when all hell breaks loose in the holiday-obsessed American retail industry, Gap Inc. chief executive Glenn Murphy was calmly walking analysts through the company's good-news, bad-news third quarter. Murphy, a veteran Canadian merchant, was recruited last summer by the struggling San Francisco-based retail giant, and this session marked his first full reporting period as the new boss.
Though he hails from the considerably less stampede-prone world of big-box pharmacies—Murphy had been the CEO of Shoppers Drug Mart since 2001, presiding over a spectacularly successful run—he gamely talked about 5 a.m. store openings as if they were old hat. Murphy let on that he planned to drop by an Orlando store for a midnight madness event. He'd show the flag and suss out consumer reaction to the chain's holiday lines, which featured a return from trend-driven styles to Gap's more traditional casual look, accented with discreet splashes of reds, oranges and blues. "The Gap brand [this season] is all about colour," he said, adding, matter of factly, "I'm wearing a 'crazy stripe' sweater as we speak."
Modelling apparel on a conference call: That's about as much of a fashion statement as anyone's going to get out of the 45-year-old Murphy, a famously low-profile figure who, that sweater aside, shows no sign of changing his stripes now that he's in the flashy world of clothing retail. Here's a guy who doesn't do industry events, doesn't do interviews and gets his professional kicks by trudging through the hundreds of stores under his command. He has no intention of becoming Gap's new pitchman, ŕ la Galen Weston Jr. Nor is he going to position himself as a stylish éminence grise in the mould of Harry Rosen. With Murphy, it's not about him.
Which is false modesty, of course. It is about Murphy, the man tapped to extricate Gap, together with its sister chains Old Navy and Banana Republic, from a protracted funk.
While Banana Republic, by most accounts, remains reasonably healthy, the Old Navy brand had a rocket rise followed by a return to Earth as it lost market share to Target and other so-called cheap-and-cheerful discounters like H&M.
Gap, meanwhile, seemed hell-bent on diluting the value of its own cachet, first by overexpanding and then by digressing into trendy fashion. Murphy's two predecessors—veteran insider Mickey Drexler, who presided over Gap's huge expansion in the 1990s, and then Paul Pressler, a well-regarded Disney marketing whiz who took over in 2002—created the dishevelled state of affairs that Murphy encountered when he arrived last summer.
Those who know Murphy's track record regard him as a merchant's merchant. Investors, moreover, have responded positively to his appointment. But he hasn't proven himself yet. Indeed, the big question is, can a guy who's spent almost all of his career in the workaday world of supermarket and drugstore aisles perform his magic in the flighty milieu of clothing?
For years, I've been a quintessential Gap customer—the impatient male consumer whose most fervent wish is for a short and pain-free shopping experience. On most days, I am wearing Gap khakis or jeans, and possibly a Gap shirt. In fact, they've made about three-quarters of my wardrobe. This is what I've come to know about the Gap: The clothes fit; they're made of solid fabric; the prices are reasonable, the bargains frequent; and the stores are perfectly suited for surgical-strike shopping missions. You can buy the first thing you try on—perfect.
I also counted myself as a big fan of those spare, funky TV spots with Gapsters bopping around in front of a crisp white backdrop. I noticed all their elegant black-and-white outdoor ads featuring celebrities like Sam Shepard. It was a brand with major mojo.
But the Gap's cool stance, and the style it heralded, were eclipsed at the company in recent years by a fashion-conscious pose that alienated core Gap buyers. Last summer, when I went to the Gap looking for jeans, I found myself puzzling over shelves piled high with a faux-retro line (dubbed 1969) that was all about odd-looking drawstrings and bell-bottom cuts I haven't worn in three decades, and unconvincing bleach jobs. Classic? Not a chance.
The Gap is a huge chain. Therefore, it makes huge mistakes. There are almost 3,200 stores among the three brands (mainly in North America), and its 2006 net sales were $15.9 billion (U.S.). But Gap has endured a lousy decade. Pressler hired several Disney colleagues, and they attempted to impose Disney's strict financial management ethic on a company that had seen its sales grow 10-fold between 1989 and 2001. It didn't work. All the top-line numbers have been falling in recent years: net sales, earnings per share, return on equity, average sales per square foot. Year-to-year performance at stores open for more than 12 months—the sacred "comp" (comparable) indicator—dropped 7% in fiscal 2006, which Gap described as "a difficult year."
