Gap Inc. was once the king of mall-brand fashion. In recent years though, its Gap, Old Navy, Banana Republic and Athleta chains have been outmaneuvered by discount stores like Target and fast-fashion brands like Zara and Shein. Ryan Knutson speaks with the new CEO Richard Dickson who is translating his previous experience resurrecting the Barbie brand into a new era for the iconic clothing seller. Further Listening: Rent the Runway’s CEO on How it Survived the Pandemic Shein: Fast Fashion, Slow IPO How Target Got Off Target Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Why did Gap lose its cool factor?
In the 1990s, the Gap was cool. So cool that supermodels wore shirts and jeans by the retailer on the cover of Vogue magazine. Actress Sharon Stone wore a Gap mock turtleneck to the Academy Awards. And then there were those popular commercials with all the dancers bopping around in khakis and t-shirts.
But for the last two decades, things were not looking too good for the Gap Inc., the parent company, which includes Gap and sister companies Old Navy, Banana Republic, and Athleta. Its sales slumped as it faced stiff competition from rival mall chains like American Eagle and fast fashion brands like H&M and Zara. To illustrate just how stagnant the company has been, consider this.
Gap stock has been essentially flat over the last 20 years, while the S&P 500 is roughly quadrupled. But recently, things have begun to turn around. Over the last two years, as of March, gap stock is up over 130%. And the person behind that turnaround is CEO Richard Dixon. Dixon joined the company in 2023 after working at Mattel, where he helped revitalize another beloved American brand, Barbie.
Chapter 2: Who is leading Gap's turnaround?
And he was at the helm during Barbie's big Hollywood debut, having served as executive producer on the Barbie movie. Now, Dixon is trying to find the same success at Gap. But with the economy facing new headwinds and consumer confidence taking a nosedive, can Dixon pull off the comeback? Welcome to The Journal, our show about money, business, and power. I'm Ryan Knutson.
Coming up on the show, a conversation with Gap CEO Richard Dixon on how he's bringing the roughly 55-year-old company back to life and the challenges that still lie ahead. Richard, thanks so much for joining us. Thank you, Ryan, for having me. So my first question is, how much of your current wardrobe is Gap?
Well, I say it is head to toe on a daily basis. It's not just Gap. We have Old Navy, Banana Republic. I even throw in a little athletic there every once in a while. But ultimately, brand fan, head to toe all day long. I can't believe how many denim shirts and jeans I have now.
Did you own any denim shirts before you became the CEO of Gaps?
I did, but I never really understood the complexity of how many versions of a denim shirt there really are. And now I really, I can tell you anything you want to know about a denim shirt. Fit, feature, function, philosophy, wash, color. Heavy, light.
All right. So we could talk about denim all day, but I want to talk about your job and the challenges that you've been facing and the work that you've been doing as a CEO of Gap. So I want to start just when you took over the brand. When you became CEO of Gap Inc. in August of 2023, what did you see as the biggest challenge the company was facing?
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Chapter 3: How is Richard Dickson applying his Barbie success to Gap?
It wasn't just one challenge the company was facing. I think, first off, it's important to recognize this is a storied legacy portfolio of brands. What I would say from a challenging perspective was recognizing these are legacy brands that ultimately lost their relevance.
Why did that happen? Why did they lose their relevance?
Well, the reason why is a multitude of reasons. But most importantly, what I would say is that the company was always strategically well-intended. It had great new extensions, great endeavors, accelerated growth intent, but flawed execution. And along the way, this was a a portfolio of storytelling brands. I mean, Gap, Banana Republic, Old Navy, Athleta.
These are very purpose-driven storytelling brands. And somewhere along the way, we lost the brand narrative and became a retailer that sold stuff. And that was most evident when you went into our stores or online. It was about the product and the price and not really about the narrative behind the brands or what made that merchandising story appealing.
And that's really a lot of, I believe, where the company went more wrong than right. That being said, it has always maintained a great deal of volume. But ultimately, the relevance, if you will, to really start to grow the brands into continuous improvement models was lacking.
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Chapter 4: What strategies are being used to make Gap culturally relevant again?
So how did you set about trying to make Gap more culturally relevant? How do you do that for a brand that used to be cool but isn't that cool anymore?
Well, you know, it isn't just one thing, but what I always start with is what made the brand great to begin with? How did it start? What was its breakthrough? How did it scale? What was happening in the world that became so interesting and relevant for the brand to hit those highs? And then where did it go wrong? And so in order to recognize, you know, how to fix
something, you have to acknowledge what's wrong. And to do that, you had to go back to the origin story. And that's what I do as a playbook. You go back and you sort of look at what made you great to begin with. What is the purpose of a brand? What is your reason for bringing? Does anybody need another denim shirt? Does anybody need another white t-shirt?
What's going to make ours unique and different? And so understanding that, and then can help you guide the context of how to create relevance So the future. And Gap as a brand started in 1969 in a progressive city in San Francisco selling denim records and tapes. It was about denim and music. It was an all-inclusive brand, all sizes, all races, all sexes.
And in the context of that conversation back then, that was a really innovative brand. approach in the context of retail and consumer. And so recognizing that origin story and figuring out how to make that relevant today is what's inspiring us.
So at your last job as the chief operating officer of Mattel, you got a lot of credit for reinvigorating the Barbie brand. Can you draw some comparisons? Were there comparisons that you can draw between what you did at Barbie and Mattel for what you're now doing at Gap?
I would say that the methodology is virtually the same. Running a disciplined business, financial and operational rigor, and ultimately reinvigorating brands. And Barbie was no exception. I had a great experience with a fantastic team there working on the revitalization of an iconic brand. Similar attributes to Gap. iconic American brand.
Going back to the start of that brand, the founder of Barbie, Ruth Handler, invented Barbie inspired by her daughter playing with paper dolls and imagining a world of possibilities beyond what careers were offered at that particular time to women and girls. And so through that process, Again, peaks and pits.
Barbie had transformed into an iconic, inspiring figure for little girls, but somewhere along the line, lost that narrative, lost that relevance. And with a team of people and lots of work, we worked to revitalize that brand, change the narrative, and create a culturally relevant brand.
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Chapter 5: How is fashion designer Zach Posen influencing Gap?
So Zach is a cultural curator. He was brought in to create, first, the statement that this is an organization that is going to evolve into a design-led, more creatively driven organization. Fashion, pop culture is identified by creating wants, and that is a creative process. It's a business about art and science.
And Zach is well known, certainly for his design capabilities, but he's also really familiar in the content space and the entertainment space, of course, Project Runway and various other ways that he's expressed his creativity, leveraging his fashion skillsets.
He's brought incredible energy to the portfolio and I believe a great addition as a creative leader in an organization that is going to unlock more and more creativity. He's a magnet for talent, which has been fun bringing in new creative talent into the organization.
where he started to have influence, whether it's on Gap with the recent launch of Gap Studio, the PR and the special dresses that we've done on the runway. Old Navy just launched an occasion segment in dresses that's starting to perform really well. Or the technical skill sets that he has on fit across our brands and how important fit is to the consumer proposition.
So all in all, you know, again, I couldn't be more thrilled to have somebody like Zach Posen in the company. And I believe, you know, the creative energy is just starting.
One of the things that he's been doing is, you know, he dressed Timothee Chalamet at a red carpet event. He dressed Divine Joy Randolph for the Met Gala. How important are things like that? This sort of like little collaborations, little partnerships with celebrities to try to make the brand feel cooler and more relevant?
Yeah, and Hathaway was also in that mix and there'll be many others. It's an important part of the relevant narrative. It's not necessarily a vital ingredient for the scale of our brand, but it's a really important part of the cultural conversation that our brands can now start to re-engage in.
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Chapter 6: Are celebrity partnerships key to Gap's brand revival?
As I mentioned, part of our objective is to create more relevance for the brands that if done well, drive revenue. But I wouldn't say it's the single silver bullet to create relevance.
Relevance is a complicated marketing conversation that ultimately drives your media mix model that changes very dramatically, your digital dialogue that changes pretty dramatically, the assets and creative that you create. So it's a multifaceted narrative, but certainly one that is topped off, if you will, with celebrity dressing.
Um, how much is Gap benefiting right now from the fact that the 90s are kind of back in style again? Like, how much do you think that this is what you're doing versus just the fact that trends are cyclical? Maybe there's some nostalgia for Gap, and therefore it's putting some wind in your sails?
Yeah, perhaps. But what I would suggest is that there are a lot of brands from the 90s that are not feeling this nostalgia and they're not enjoying a resurgence. So I think that you've got to be able to recognize consumer trend and how to play into them. And we are doing a good job capturing the interest of nostalgia in a way that connects with this generation. That is the art behind the business.
And there are other brands today that are enjoying that with their own version of renewed relevance. But there are plenty of brands in the 90s, by the way, having lived through them, that have not necessarily seen that kind of energy.
All right, we're going to take a short break. And when we come back, we're going to talk more with Gap Inc. CEO Richard Dixon on how to ensure the momentum doesn't fizzle out and what he sees in the broader economy. What gives you confidence that this turnaround won't fizzle out? I mean, Gap had a little over $15 billion in net sales last year, which is an improvement.
It's more than 2023, but it's still less than where the company was in 2018. So what work do you feel like still needs to be done?
Well, the metrics that we shared in our last quarterly call were not one and done, if you will. We talked about we exceeded financial expectations. We grew market share. It's the eighth consecutive quarter that we've grown market share. It's a really important metric to understand because the market itself, the apparel industry, has been declining for the past two years.
We don't love that, by the way. We want to be part of a growing industry. But the facts are what they are. The apparel industry has declined over the last two years. We have grown our market share over the last couple of years. That's an indication that we are breaking through. We are resonating with consumers.
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