When Richard Dickson took over as chief executive of Gap two years ago, it was far from certain that the US fashion retailer had much of a future. Plenty of consumers had long moved on from the denim jackets and branded hoodies that once made the brand synonymous with casual cool.
But Dickson says the 56-year-old retail group — which also owns the Old Navy, Banana Republic and Athleta fashion chains — is now on the front foot once more.
“It’s been a pretty remarkable two-year journey,” he told the Financial Times this week, adding that Gap was now “laying the seeds” for a phase of faster growth.
Gap has begun to look at expanding its namesake chain in the US and overseas after what Dickson described as a necessary “retrenchment”.
Meanwhile, he is overhauling Gap’s product range, including the introduction of beauty products into Old Navy stores, as well as its marketing to try and capture the fleeting attention of today’s youth.
Investors have been encouraged by the progress made, but analysts say it is now on Dickson to prove he is putting together a turnaround that is made to last in an inherently fickle industry.
Some scepticism is understandable given that Dickson is far from being the first Gap boss to promise a revival. But he does have form for revitalising faded American brands. As chief operating officer at toymaker Mattel he helped refashion Barbie for a new generation — most notably with the licensing of the brand for a hugely successful movie.
Dickson is not new to fashion either. He spent several years at US department store Bloomingdale’s, followed by a stint revitalising fashion brands at The Jones Group.
In interviews with the FT — initially at the Cannes festival in June — Dickson said before joining Gap he saw a company that had lost its way and was “really struggling with all sorts of challenges”.
“But I saw [the chance] to help an iconic company regain its relevance. So we’ve been really working hard getting back to the roots”.
Gap had been stuck in a steady decline since its heyday in the 1990s. As the brand kept churning out the same hoodies and jeans it struggled to cope with competition from more nimble, trendier rivals like Zara, which displaced it as the world’s most valuable clothing retailer in 2008.
Neil Saunders, an analyst at GlobalData Retail, said that before Dickson’s arrival Gap was a “staid business” that was not “very adventurous”. Dickson’s predecessors tried a number of initiatives to revive sales, including an ill-fated tie-up with rapper Kanye West that ended in 2022.
Gap cut its product range and shut stores in the US and overseas, closing the majority of its European outlets. The work began in 2020 but continued under Dickson. Net of openings, 350 Gap and Banana Republic stores in North America have closed from the between 2020 to 2023, leaving the group with a network of about 3,500 stores in more than 35 countries.
There was a need “to retrench and to come back as a fresh new Gap . . . with a much more relevant narrative and a much more modern approach,” he said. Last month Gap reported that second-quarter comparable sales grew by 1 per cent from the year-ago period.
Gap is now “at a place where we’re looking at renovating and opening new doors”, Dickson said, including expanding once more in key European markets in a “much more pronounced way”.
It is also discounting less, according to research from Barclays. This can depress sales in the short term but typically helps fatten up profit margins.
Dickson is conscious that Gap’s core range, which he likens to “milk and eggs in a grocery store”, will remain focused on basics including khaki trousers, jeans and T-shirts. But Gap’s chief said he is “in the early innings” of refreshing its product development and design to attract younger consumers.
He wants to develop the next generation of Gap customers, a more youthful, social media-savvy audience, without alienating the Gen Xs and baby boomers who see Gap’s clothes as wardrobe staples.
The group has targeted Gen Z shoppers by working with influencers, including pop stars Troye Sivan and Tyla, and introducing loose fitting jeans and dungarees.
Gap has followed rivals such as American Eagle in focusing on its denim range, with a “Better in Denim” ad campaign, featuring girl group Katseye dancing to Kelis’s “Milkshake”, going viral.
Designer Zac Posen, known for his elegant evening gowns, has been brought in as creative director, overseeing a new line, GapStudio, which produces a more “high-fashion” take on Gap classics.
Gap Studio is “on the runways. I think our brand can play in both spaces,” Dickson said. “You’re never going to feel uncomfortable buying Gap. And then we’ve got this elevated expression where you’re part of fashion”.
The turnaround is showing early signs of progress, Saunders said, adding that analysts are “now looking to see how rooted this recovery is”. Gap reported net income of $216mn in the second quarter, compared with $206mn a year earlier.
Old Navy, the larger and more value-oriented offering than Gap, requires less surgery than Gap itself. However, the main drag on the group’s recent performance has been athleisure brand Athleta, where comparable sales fell 9 per cent in the second quarter.
“Brand management, operations and product design have improved,” David Swartz, a senior equity analyst at Morningstar, said in a June note. “Despite these efforts, the competitive pressures have only grown, and [the] improvement in Gap’s financial results has been limited.”
Tariffs will make further improvements harder to achieve. After efforts to mitigate the impact, Gap now estimates a net tariff impact of $150-$175mn to 2025 operating income but, crucially, no further impact next year.
“We’re at a really important juncture,” Dickson said. “We can, with confidence, say we’re moving through our transformation journey from fixing the fundamentals to building momentum.”
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