Much of the 1990s were good to Gap, Inc., with the retailer being named marketer of the year, and moving into the number two spot for largest selling apparel brand in the world. Then came the 2000s when Gap began to wane. The famous Gap logo – iconic in its own right, featured prominently on the quintessential 90s Gap hoodie – had lost its appeal and the company was posting significant losses. And with five years of consecutive revenue declines starting in 2005, it looked as though Gap’s time was limited. However, in the past few years, Gap has experienced a resurgence in sales and has seen its stock price soar. So, what happened? How did the crippled retailer get back on its feet?


The early years

Gap was founded in 1969 by husband and wife team Don and Doris Fisher in San Francisco. Don, a wealthy real estate developer, took note of the increasing popularity of jeans and decided to launch his own retail store that carried a wide range of sizes after being unable to find jeans that fit his 34 x 31 frame. Choosing the name Gap, a reference to the divisive generational gap wedging the Baby Boomers and previous generations, the Fishers’ newly opened store stocked Levi’s, records, and tapes. The store was an instant success, becoming a publically traded company after only two short years in operation, and reaching sales of $100 million by 1975.


Gap Founders



By 1980, sales had reached $307 million and, following a decade of organic growth, the company acquired Banana Republic, a small safari-themed retailer, in 1983, rebranding it as an accessible luxury apparel store. In 1986, Gap’s first international location opened in London and Gap sales reached $1 billion. GapKids and BabyGap were launched in 1986 and 1990 respectively, further diversifying the Gap product mix. In 1992, Gap became the second-largest selling apparel brand in the world. The first Old Navy store was opened in 1994, and by 1997, its sales had reached $1 billion. Gap had become wildly successful since its 1969 launch, surpassing all of the Fishers’ expectations.



Though the apparel industry had always been volatile, competition increased considerably in the late 90s and early 2000s. J. Crew, American Eagle Outfitters, Nordstrom, and Abercrombie & Fitch were just a few brands that cut into Gap’s market share as they experienced positive growth in the 90s and 2000s. A&F, for instance, had fewer than 100 stores in the early 90s, but has over 1,000 locations today. Additionally, Gap was losing its appeal among 14-25 year olds as the flagship brand targeted youth and adults alike, causing confusion among consumers and culminating in the 2011 announcement of the closure of 189 U.S. stores (or 21% of its U.S. locations). “Instead of a holistic, comprehensive, cross-company strategy, the Gap seems to have randomly chosen its strategy cards with little understanding of what its customers want,” wrote business strategist Ravit Lichtenberg in 2008. “Unless the Gap takes a step back and truly invests in understanding how to rebuild itself as a customer-centric brand, it will not last long.”



Though the days of near retail world domination are long gone for Gap, the company has slowly been experiencing an upturn in sales thanks to a focus on online services, international expansion, and efficient inventory systems.


People walk past a soon to open Gap stor


Online services: In addition to shipping to more than 90 countries through its U.S.-based website, Gap launched dedicated online sites for Canada, China, and the U.K.

International expansion: Today, Gap has more than 350 stores across Asia, Australia, Eastern Europe, Latin America, the Middle East and Africa.

Efficient inventory systems: Gap’s inventory system allows for speedy restocking and boosts the company’s inventory turnover ratio, effectively allowing for the introduction of a greater number of products throughout the year and an increase in store traffic.

Financials: Not everything is rosy, but Gap and its brands are up in many financial categories. Last week, the company reported its November sales; Gap Global’s comparable sales for November 2013 were up 2% over November 2012 levels. For Banana Republic Global, that figure is -1%, and +3% for Old Navy Global. Investors remain cautiously optimistic on the stock, with the NASDAQ’s online community giving it a 60% bullish rating.


Still highly volatile, the company has come a long way in just a few short years. In 2009, the stock (NYSE: GPS) was trading below $10. Today, it hovers just short of $40. What the future holds for Gap is uncertain, but it’s apparent that the company’s most recent strategy has helped the company stop the bleeding after years of losses.


What are your predictions for the future of the once iconic retailer? Will the Gap still be a major player in 10 years? Connect with us on Twitter @NapkinBetaBeyond or through Facebook to let us know what you think.


Photo credit: Frederic J. Brown/Agence France-Presse/Getty Images