These are articles written or co-written by EAH staff, published as blogs or articles on this website or other websites.
On March 16th, 2021, CEO Elaine Hughes spoke as a panelist during the Sacred Heart University Jack Welch College of Business & Technology Women in Business event. If you missed it or would like to watch the series again, you can watch it here:
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Within the ranks of retailers, there’s a chief in almost every corner. There used to be just the chief executive officer, chief financial officer, chief operating officer and chief merchant. Now there’s a chief diversity and inclusion officer, a chief innovation officer, a chief technology officer, a chief revenue officer, a chief sustainability officer, a chief legal officer, a chief strategy officer, a chief people officer, and a chief transformation officer. In January, Neiman Marcus Group named Bob Kupbens executive vice president, chief product and technology officer, a new role at the luxury retailer. Last June, Saks Off 5th created the new role of chief customer officer, which was filled by Rob Brooks. He leads Saks Off 5th stores, human resources, asset protection, logistics and fulfillment. In February 2020, when Macy’s revealed closing 125 stores and cutting 9 percent of the corporate and support staffs, Danielle Kirgan, chief human resources officer, took on an expanded role as chief transformation and human resources officer. Back in April 2019, Macy’s put Dennis Mullahy in the newly created title of chief supply chain officer, overseeing the entire product journey — global sourcing, inventory management, store and e-commerce distribution, transportation, indirect procurement, supply chain systems, sustainability and supplier diversity. Other executives moving up the corporate ladder and becoming functional chiefs in their responsive areas were Holly May, who became Abercrombie & Fitch’s chief human resources officer, overseeing talent management and leadership development, diversity and inclusion, compensation and benefits, and all other facets of organizational, talent and culture building initiatives. And last July, Rent the Runway named Ellen Shultz chief people officer and Larry Steinberg chief technology officer. This perpetual evolution of retail management structures reflects changing priorities and consolidations that’s been accelerated by the pandemic. Adding the title of “chief” reflects wider responsibilities attached to the role, adds prestige to the position and helps reduce further executive turnover. It also implies a seat in the executive suite with a direct line to the CEO. But fewer senior managers on the team means those remaining must take on broader responsibilities and retailers will have to double up on their search efforts for executives with versatile skills or poach from the bench. Just last Monday, Macy’s Inc., eliminated the role of chief operating officer. Last month, Academy Sports and Outdoors Inc. also eliminated the role of chief operating officer. Responsibilities at both retailers were distributed to continuing executives. There are upsides to establishing leaner hierarchies, aside from the obvious cost savings. Saks Off 5th, for example, stated that giving Brooks responsibility for both stores and human resources, overseeing the majority of the company’s associate population, creates “significant opportunities for alignment and engagement across the organization.” Macy’s Inc. chairman and CEO Jeff Gennette told WWD that by culling the executive team “they all buy into enterprise-wide priorities. All of our senior leaders have a role in many of the pillars of our Polaris strategy,” which sets the key initiatives for Macy’s long-term growth. Gennette’s predecessor Terry Lundgren, who ran Macy’s for 14 years until early 2017, was among the first, if not the first, to add “chief customer officer” to the sign on the door to his office. “I had it there for as long as I can remember,” Lundgren said. Though always an unofficial add-on to his title, “it was important for my people to know that I was putting the customer in the center of my decision making. I wanted my employees and executives and others to always keep that in mind when they popped into my office. “When we created the job for chief diversity officer it became an important role to ensure thinking about customers and employees in a complete and all inclusive way,” said Lundgren. In 2010, Macy’s named a chief environmental officer for the first time, which subsequently changed to chief sustainability officer overseeing recycling, solar panels, reducing waste and other environmental causes. “If you have someone full-time focused on it, and it’s the right person, you make progress,” said Lundgren. “Generally speaking, the key role is ‘chief cook and bottle washer’ — no joke,” said Elaine Hughes, CEO of executive search firm E.A. Hughes, a division of Solomon Page. “Every company is going to have to figure out how to do more with less. It’s a boon for consulting companies to come in and show them how to operate under a reorganization. “At a number of companies, the role of chief financial officer has evolved into chief revenue officer which has accountability over the entire business or in some cases multiple divisions,” Hughes added. “This role oversees that the businesses are driving toward profitability through enhancing margins and controlling expenses. Formerly it could have been the CFO, but the CFO never had authority over the divisions to push on sales, just expenses. A chief revenue officer would typically have a financial background and also a business development, mergers and acquisitions background. If a company can no longer pursue organic growth, they grow through acquisition.” “Chief titles signal priorities,” said Kirk Palmer, founder and CEO of Kirk Palmer Associates executive search. “The proliferation of new C-suite roles reflects key areas of transformation over the last decade — digital, technology, diversity, sustainability and customer-centricity. As these functions have become more critical, these new chief titles are meant to tell internal and external stakeholders how the company has elevated the importance of these roles to accelerate change. “Some of these new C-titles are likely to stay — chief customer officer, chief digital officer and chief diversity officer,” Palmer said. “Others, such as the new health-related chief titles, could be more fleeting as priorities shift over time.” Lundgren said that the head of human resources at one time was also in charge of diversity. Now that’s a separate role “to make sure that diversity and inclusion is a continuous conversation in the company.” Stores, particularly those selling nonessentials as designated during the pandemic, “must reduce expenses because they have less revenue, so partly what you are seeing are some roles collapsing and consolidating so people will have larger responsibilities and titles,” said Lundgren. “It’s always good to rethink your structure,” he said. “When I was there, we announced a structure change almost every year, even when we were doing well. I never believed the status quo was the right answer, but you start with what is required to satisfy the needs of the customer, and what is required to fund the growth of the business.” “With the almost apocalyptic change in the retail landscape, retraining will be the key for folks to take what they know and adapt to some of the new skill requirements,” said Hughes. “In an elementary sense, it’s no different than when clerks went from being a cashier in a store to operating a computer for a transaction, so there could be a chief learning officer involved in all kinds of interactive training and development, introduction of product, approaching customers, with four or five managers reporting to them. They could have a background in education and expertise in their business.” Chief learning officers would meet the need for constant retraining as retailers innovate in artificial intelligence, augmented reality, robotics, drone delivery and supply chain. Hughes also cited the chief transformation officer, sometimes called chief strategy officer, as an emerging designation for someone overseeing organizational change as well as driving new businesses. “This role reflects the customer centricity that is starting to emerge.” Chief human resources officers have evolved into “chief advocacy officers” to not only advise the CEO but to be the bridge pulling divisional organizations together. “They are first-line responders in a time of crisis,” said Hughes. “Formerly, the HR officer would handle hiring, benefits, salaries. The role has expanded to represent the entire citizenship of the organization, promote the health and welfare of employees, understand their individualities and conduct assessments.” At Estée Lauder Cos. Inc., Jane Lauder, granddaughter of the company’s founder, was recently named executive vice president, enterprise marketing and chief data officer. In her new role, Lauder leads myriad groups, including global corporate marketing, business insight and analytics, and marketing and consumer-supported technology. Chanel last September promoted Agathe Derain to head of human rights and corporate sustainability, a new role at the French fashion house, to provide greater insight and expertise on human rights and potential risks in supply chains worldwide. Retailers could very well create more “chiefs” like a “well-being” chief, in response to the current health crisis fomenting health concerns long term. Other new retail roles and jobs have recently emerged. Walmart, for example, created “health ambassadors” stationed by entrances to remind people to wear masks and socially distance. Similarly, Aritzia created health and safety advisers for its stores so health and safety protocols, like masks and hand sanitizers and store capacities, are maintained. “The role most talked about is chief diversity and inclusion officer, reporting to human resources,” said Hughes. “This role has existed in corporations for the past few years but it’s now more critical than ever.” For the original article, visit: WWD. |
In the myth-making of corporate America, there’s a lot of focus on the “hero’s journey” of the chief executive officer as the ceo tightens operations, rallies employees and takes on all comers to build more purposeful market share machines.
But it’s really more of a buddy movie.
Yes, the ceo is in charge and ultimately accountable and it is the ceo’s reputation on the line, but the person in this role is not doing it alone. The ceo has many partners in progress, but in the time of COVID-19 the role of chief financial officer has grown to become more important than ever, helping to steer the ship through the storm, making tough decisions while raising money and trying to divine the future.
“The cfo, generally speaking, has a pretty broad strategic role,” said Kirk Palmer, founder and ceo of executive search firm Kirk Palmer Associates. “In many if not most companies, cfo’s are indeed one of the closest partners of the ceo — 2020 just took it to a new level because they had to accelerate their decision making.”
If ceo’s and cfo’s were close before, “they’re BFF’s forever now,” Palmer said.
There’s a certain alchemy in work relationships, which are never all business and rely on a certain compatibility to start and then a lot of work to sync up and push through a strategic plan.
When it works, it works.
As the pandemic sent shoppers home and shut down retail, VF Corp. shifted to a two-pronged approach focusing on both the “now” of fortifying the business and the “next” of being ready to come out of the crisis stronger.
There was plenty of work to go around in the suddenly remote c-suite.
Cfo and executive vice president Scott Roe tackled the now, while chairman, president and ceo Steve Rendle looked to what would come next for the giant.
That had Roe building a fortress of a balance sheet, managing inventory and putting the parent of The North Face, Vans and Timberland on a crisis footing.
“We took really hard and quick actions,” Roe said, stressing the need to be positioned to go on the offensive. By September, the company had $1.9 billion in cash and equivalents on hand, a five-fold increase from just 12 months earlier.
“It’s not about this year, it’s actually about emerging in a position of strength so that we’re actually gaining momentum coming out of this,” Roe said. “This is a refining fire that everyone’s going through.”
Having all that cash on board, and having Roe on point, gave Rendle the space to think strategically. “It wasn’t that I wasn’t involved,” said the ceo, of the rush to shore up the company. “But I was really looking forward to the future and thinking what it would take to emerge stronger.”
It’s a division of labor that clarified their respective tasks and built on their experience together.
“We really had a great working relationship before this, but I think this was a real clear understanding of, ‘Let’s divide and conquer,’ and help the enterprise navigate these unique situations,” Rendle said.
VF held up better than most in the shutdown and was among the first to pounce in the COVID-19 deal market, positioning itself for its next leg of growth with a $2.1 billion-plus agreement to buy Supreme, bringing a hot brand and some more street cred to the firm’s active portfolio.
VF Corp. cfo Scott Roe, left, with ceo Steve Rendle.
“The ceo should have a comprehensive vision for the company and those surrounding that individual in the c-suite should be able to execute on that vision depending on their roles,” said Elaine Hughes, ceo of executive search firm E.A. Hughes. “In the case of the cfo, that role is not just about squeezing a budget to reduce costs but today more than ever, significantly changing the company’s processes and mode of operation.
“Today’s volatility is unprecedented and will forever change the landscape of how companies function,” Hughes said. “However, volatility has been a constant, whether global corporations need to adjust to currency fluctuations, global politics, supply chain, tax implications, investment in sustainability, the complexity of technology and the human resource dynamics. All these require a cfo’s leadership where she/he creates the benchmarks in their organizations to gauge success and hold the management accountable for those performance measures.”
At Levi Strauss & Co., the ceo/cfo pairing of Chip Bergh and Harmit Singh synced up long before the pandemic hit.
“We’ve been through a lot together,” Bergh said. “When he joined [in 2013] we still had $2 billion of debt on our balance sheet. We were highly leveraged, our ratings by the credit agencies were four of five notches below investment grade and our balance sheet was a liability. We weren’t creating any shareholder value and we really hadn’t created any shareholder value for over a decade.”
The pair helped the company reverse course and go public again last summer, getting the New York Stock Exchange to drop its no jeans policy at least for a day.
“We’ve worked together so closely for such a long time, we can practically finish each other’s sentences,” Bergh said. “It’s great to have a cfo who believes marketing is an investment, not an expense. Every time we move the brand ahead it’s like putting pennies in the bank. In many ways, we are very like-minded. We’re both very, very disciplined. We’re both really focused on measuring what we invest in and measuring the effectiveness of what we invest in.”
Levi’s moved early in the pandemic, laying off 700 people — 15 percent of the corporate workforce — in July, accepting that the business would be smaller for a while, but could also make market share gains. The cuts helped Levi’s return to profitability in the third quarter.
“I drove the working capital efficiency and Chip kind of cheered me on,” Singh said. “We really focused on driving profitability.”
But it’s a fine line, the cfo said, noting that it all required, “communicating with your investors, communicating with your employees and demonstrating empathy because people are scared and safety is so paramount.”
And although a workforce restructuring of that size by itself would mark a busy year for a cfo, it was only part of Levi’s pandemic response.
“We did raise half a billion dollars and that happened in like five days,” Singh said. “I went to Chip and I went to the board and I said, ‘We’ve got to do this.’ It allows us to have dry powder if things get better for M&A, it allows us to get ready for tough conditions.”
As painful as the pandemic was, having something of a mind-meld at the top can be helpful.
“The ceo-cfo relationship is a key relationship,” Singh said. “It starts and ends with trust and the ceo and cfo need to be able to talk about just about anything in the company. We share common values and the vision for the company. It becomes important because it allows the cfo working with the ceo to quickly allocate resources in good times and bad times.”
Consultant Timothy Derr, a partner at Kearney who works with retail ceo’s and cfo’s on large-scale transformation projects, said a strong working relationship between the ceo and cfo heading into the pandemic is a key factor in how successful companies have been in navigating the crisis.
Where the ceo is charged with making the final decision, cfo’s have to really take inventory of all the alternatives and advise on the best path forward.
Being cfo is a gig that’s evolved in recent years with the bean counters of old becoming heads of the company’s nerve center, serving functions that are both analytical and more take charge..
“COVID-19 turned the cfo into not only an operator, but also change leaders internally,” Derr said. “Cfo’s were also responsible for testing all of the resiliency of the organization and understanding any weaknesses.”
And despite all the talk about the next quarter with companies on Wall Street, the top finance job also has a much longer-term component, which is why many cfo’s have good reasons to ensure the company is strong well into the future.
“The cfo’s trying to set themselves up to be ceo, so they’re looking at this a lot more longer term than the ceo is,” Derr said.
For the original article, visit: WWD.
E.A. Hughes is pleased to announce our partnership with Marquee Brands LLC in placing Neil Fiske as their new Chief Executive Officer.
As seen on PR Newswire September 8, 2020
NEW YORK, Sept. 8, 2020 /PRNewswire/ — Marquee Brands LLC, a leading global brand owner, marketer and media company, announced today the appointment of Neil Fiske as the first chief executive officer of Marquee Brands LLC. Fiske has 20 years of brand building experience across various consumer segments. Most recently, he was the chief executive officer of the GAP brand.
“Neil brings world-class multi-brand operational experience to Marquee Brands and has a track record of successfully building and repositioning brands. We are very excited to have him lead the team as the company’s first chief executive officer. Neil has the leadership track record and breadth of business experience we believe are critical to lead Marquee,” said Sam Porat, Managing Director, Neuberger Berman.
Founded in 2014, Marquee Brands has become an industry leader in brand acquisitions and brand building and today manages a portfolio with $3 billion of retail sales across 11 brands and four consumer segments. This includes the recent acquisition of the iconic brand Sur La Table which further builds upon the Home and Culinary portfolio within Marquee Brands.
“As we continue to build and evolve the Marquee Brands business model, it was the right time for us to find a CEO with the experience and strategic foresight to take advantage of the unprecedented market opportunities ahead of us,” said Zachary Sigel, Managing Director, Neuberger Berman. “Neil shares our vision for Marquee and will position us well to fully capitalize on the current dislocation across the retail and consumer industry. We welcome him to the Marquee Brands team, and we are excited about the future.”
Over the past six years, Marquee has successfully built a portfolio of category leading brands, steeped in heritage and history with a strong consumer identity and diversified channels of distribution. Marquee has created a best-in-class platform including its Marquee Direct e-commerce business to drive significant organic growth post acquisition. Marquee’s focus on building brands by investing in them to ultimately deliver unique offerings to retailers and customers has helped their portfolio standout in a rapidly changing retail environment.
“Marquee Brands has one of the best portfolios in the industry with premium brands that are truly meaningful to the consumer, have clear identities and competitive positionings, and a runway of growth ahead of them.” said Fiske. “I am fortunate to join a company that has a proven formula for success, a strong team adapting quickly to this ever-changing environment, and investing at a time when many are in retreat. With the full backing of Neuberger Berman, I look forward to working closely with Michael DeVirgilio, Cory Baker and the executive team to grow this business and capitalize on the rich set of opportunities so clearly in front of us.”
Fiske’s career as a CEO has focused on building brands, transforming businesses, and adapting to a seamlessly omni channel consumer environment. Prior to the Gap, Fisk served as chief executive officer at Billabong International, where he restored the flagship Billabong brand to a position of market leadership and multi-year share growth. He also spent five years as president and chief executive officer at Eddie Bauer, repositioning the company to focus on its heritage as America’s original outdoor outfitter. Fiske was also chief executive officer at Bath and Body Works, where he led a complete brand transformation, reversing a multi-year trend of negative comp store sales. Fiske began his career at Boston Consulting Group, focused on consumer goods and retail. He graduated from Harvard Business School with a Masters of Business Administration and received a B.A. in Political Economy from Williams College. He also has private equity experience as a retail industry partner for Onex. He has been named WWD’s “Marketer of the Year” and “Retailer of the Year”, as well as co-authoring the award-winning brand building book “Trading Up: The New American Luxury.”
About Marquee Brands
Marquee Brands is a leading global brand owner, marketer and media company. Owned by investor funds managed by Neuberger Berman, one of the world’s leading employee-owned investment managers, Marquee Brands targets high quality brands with strong consumer awareness and long-term growth potential. Marquee Brands seeks to identify brands in various consumer product segments with the goal of expanding their reach across retail channel, geography and product category while preserving the brand heritage and enhancing the ultimate consumer experience. The portfolio includes Martha Stewart, BCBG, Ben Sherman, Dakine, Sur La Table Body Glove, Emeril Lagasse, Motherhood Maternity, A Pea in a Pod, and Bruno Magli. Through its global team of professionals and partners, Marquee Brands monitors trends and markets in order to grow and manage brands in partnership with retailers, licensees and manufacturers through engaging, impactful strategic planning, marketing, and ecommerce. www.marqueebrands.com
About Neuberger Berman
Neuberger Berman, founded in 1939, is a private, independent, employee-owned investment manager. The firm manages a range of strategies—including equity, fixed income, quantitative and multi-asset class, private equity, real estate and hedge funds—on behalf of institutions, advisors and individual investors globally. With offices in 24 countries, Neuberger Berman’s diverse team has 2,300 professionals. For six consecutive years, the company has been named first or second in Pensions & Investments Best Places to Work in Money Management survey (among those with 1,000 employees or more). The firm was awarded an A+ in every category in the latest 2019 PRI report for our approach to ESG integration across asset classes. The firm manages $357 billion in client assets as of June 30, 2020. For more information, please visit our website at www.nb.com.
SOURCE Marquee Brands
For the original press release, visit: PR Newswire
Elaine Hughes, CEO of E.A Hughes, was recently appointed to the Advisory Board of Springs Creative located in Rock Hill, South Carolina. Springs Creative, a diversified Consumer Product company that distributes to major retailers and houses one of the largest print archives in the country, supports the product development initiatives of both the wholesale and retail community.
Recently, our very own Elaine Hughes, sat down to chat about future-proofing your career in denim on the Kingpins Show. Below is a recap – to view the full video, please visit: https://youtu.be/G_mJxUH7eyo or click below!
Andrew: When furloughed employees return to work, will they be grateful or unhappy with the companies they work for?
Elaine: Keyword is “furloughed.” A number of organizations have to address the fact that when businesses have to shut down for health-related reasons, there is a choice. You can be laid off or furloughed. Furloughed is a way to show employees they are valued, but they are putting employment on pause. Dependent on how the world opens up in retail, people will be invited to come back to work.
Andrew: What does a pivot look like for people in this industry?
Elaine: Pivot is synonymous with change. This is a huge consulting opportunity. Whether it is educational institutions or private institutions, people will receive assistance. One of the biggest places will be online. Always consider your skillsets and have an open mind to change. Change comes through networking, research, and communication.
Andrew: Do larger companies have an HR department that is capable of helping families navigate through the COVID crisis?
Elaine: It depends on the company. There is a big difference between retail and apparel. Retail usually has very sophisticated HR departments. Apparel depends on the company and how they value the human asset. That is different from company to company.
Andrew: What industries should people in the Fashion industry look at?
Elaine: There are certain industries where there is a continuation. Sustainable industries include footwear, accessories, and basics. Fashion will continue, but in a different format.
Andrew: What will the Jean industry look like in the next 18-36 months?
Elaine: Jeans as a category will be an essential part of wardrobe for generations to come. It is not going away; it will just be displayed in different formats. Whether it is color or a different fiber. We are entering an era where we have a little bit of a pause and patience is required. In that, we will see a resurgence next year.
Andrew: Is there any impact on Fashion schools?
Elaine: There needs to be internship programs starting after sophomore year and a continuation of a database for these students as well as a department to help them network. Students need to be prepared to do anything and ask companies what they can do for them. In that, opportunities will arise.
E.A. Hughes has been ranked by Forbes as one of America’s Best Executive Search Recruiting Firms of 2020. We are thrilled by this news and would like to extend our sincere thanks to our clients and candidates for their continued partnership.
This fourth annual award list is published by Forbes Media and Statista recognizing E.A. Hughes as one of America’s Best Recruiting Firms 2020 in the Executive Search category. Our parent company, Solomon Page, was also recognized in the Professional Recruiting Firm category!
Of the thousands of firms nationwide considered for this honor, only a few hundred are awarded this distinction in each category.
If it isn’t already, evolution should become the most important word in your vocabulary as a leader, as forward-thinking brands will continue to rise to prominence amidst every consumer-focused company emerging from this first fight with COVID. I saw this quote recently:
“Experience is a hard teacher because she gives the test first, the lesson afterward”
Nothing could be more valid for businesses in the current environment. Naturally, this leads me to ask a question you’ve asked yourself many times over by now—how is your company doing during the biggest stress test we have ever experienced?
The stress associated with these rapid changing, seemingly daily events across the country only emphasize the need for better, open-minded leaders and having the right people in place to think strategically and act tactically. This crisis has only affirmed the value of digital capabilities in every function no matter how large or small your business is. Artificial intelligence and the importance of data will supersede old management behaviors as most executives have relied on their experience and instincts. The analysis and evaluation of your organization’s stress test to operate remotely will present an opportunity for improvements in systems, supply chains, marketing/communications, and operations. But undoubtedly, the biggest factor above all will be leader performance. Do you have the right people in place who have risen to the challenge or did you experience limitations and lack of performance?
From the consumer perspective, the analysis from the past two months has become clear. Companies with diversified merchandise categories that appeal to a wider customer audience have fared better than others. Grocery, drug, and hardline companies have taken center stage while the apparel and fashion businesses have become unessential and not important. Nearly every retailer has experienced new norms for commerce: longer fulfillment times, drive-through shopping, reduced hours and massive store closures. Omni-channel players have seen an uptick in their e-commerce sales, but not nearly enough to compensate for the loss of sales in the stores. Pure-play retailers have seen their financial valuations skyrocket. The epidemic that has changed everything for the past two months has widened the gap in retailing between the frontrunners and everyone else.
The time is now—as discussions are happening on how retailers and consumer companies will reopen, assess your leadership and ask if the perfect trailblazer is in place as your business begins to recover. E.A. Hughes can be an impactful resource for you to access the best leaders in the market—many of which have transformed brands long before the pandemic. We would love to see how you are faring and how we can assist in bringing best in class talent to your teams, all while sharing our knowledge of the marketplace as the industry continues along its own, never-ending evolution.
We, the E.A. Hughes family, hope this note finds you and those close to you in good health. There is nothing more important than the safety of our clients, friends, and family during these unprecedented times. With the rapid evolution in the workplace and daily changes in our environment, we want to let you know that we are available to you and prepared to respond whenever you need us.
E.A. Hughes deeply values the relationships we’ve built over the years and we plan to continue making these relationships of the utmost priority in the years to come. Action speaks louder than words, so please reach out and we are happy to help in this time of crisis. Together, we will get through this.
In good health,
E.A. Hughes
Heading into the holiday season, Gap Inc. is confronted by major internal challenges — beyond satisfying customers seeking gifts.
By David Moin on November 21, 2019 WWD
With Gap Inc. reporting third-quarter earnings Thursday, investors are looking for answers: Will the spin-off of Old Navy happen as planned by mid 2020 or get postponed; who will be the next chief executive officer, and what’s the strategy for reviving Gap brand?
Gap Inc. — which removed Art Peck as ceo earlier this month, named chairman Robert Fisher interim ceo and pre-reported depressed sales across core divisions — must decide whether to seek a merchant leader for ceo, cast a wider net, or consider an insider.
One possibility is postponing the public spin-off of Old Navy, initially seen occurring in the first half of next year, and shifting Sonia Syngal, president and ceo of Old Navy, to ceo of the overall group. Postponing makes sense considering the business at Old Navy, which accounts for almost half of Gap Inc.’s $16 billion in annual sales, has softened this year and there’s little market receptivity to initial public offerings.
For the third quarter, when comps fell 4 percent, 50 cents to 52 cents in earnings per diluted share are expected, compared to 69 cents in the year-ago period. Gap Inc. reduced its earnings outlook for 2019 to $1.70 to $1.75 per diluted share, from an earlier $2.05 to $2.15 projection. The stock closed at $16.28 Wednesday and has ranged from $15.11 to $31.39 over the past 52 weeks.
“Sonia knows Gap Inc. inside-out. She’s super strategic and she’s been a rock star at Old Navy, but you can’t take Old Navy public without Sonia there as ceo,” said a retail executive with knowledge of the inner workings of Gap Inc.
While Syngal is considered a strong supply chain and operations executive, not a merchandiser, many believe Gap Inc. would best be served by a merchant leader, someone like the legendary Millard “Mickey” Drexler, who catapulted the Gap brand in the Eighties and Nineties and launched Old Navy and Madewell. But it’s slim pickings out there. Gap Inc.’s last three ceo’s — Peck, Glenn Murphy and Paul Pressler — were all nonmerchants and unable to turn around Gap brand, stoking some perceptions that Gap is unsalvageable.
Nevertheless, industry sources contacted by WWD over the last several weeks had no shortage of ideas on how to revive the brand and generally expressed hope.
“Gap has lost its identity,” said Robert Burke of Robert Burke Associates. “Right now, I am not sure what Gap stands for. If it’s unclear to people in the industry then it’s really unclear to customers. Gap was one time at the forefront of marketing, with its TV commercials and collaborations. That’s gone away. Gap needs to redefine who they are. Times have changed and the Gap hasn’t. It’s a combination of things that need to be done. There isn’t one magic category. Old Navy has prospered offering product at a price point while still having an image.”
“The Gap needs to study why their stores were once exciting and profitable and an attraction,” said Joseph Cicio, who spent 20 years at Macy’s Inc., rising to senior vice president of fashion direction and creative resources and who ran the former I. Magnin chain. “It was distinctive merchandising, stories, basics, impulse purchasing and merchandising. The Gap needs a major makeover, and it should start with management at the top. New visionary leadership will automatically instill a more progressive merchandising culture. It is not a simple fix, but surely a worthwhile one.”
Other suggestions by Cicio: emphasize volume basics as well as seasonal items, upgrade merchandise presentation standards and reevaluate fixturing and space design.
“Gap has amazing brand equity,” said one retail marketing executive who requested anonymity. “It’s a cross-generational brand.”
“When Mickey Drexler was running Gap, there was innovation, new styles, new ideas, new fashion all the time,” said retail analyst Walter Loeb. “They promoted their great assortment of jeans and it was almost mandatory to shop there. It was a destination. Now I don’t think there is much excitement in the store. They need a fashion designer that could boost Millennials shopping there. The story reminds me of Benetton, which was known for tops and sweaters and after a while lost its luster.”
According to Helaine Suval, partner at WHYZ Partners: “Gap needs to focus on their core customer, listen and deliver what that customer wants. They need to look at the competition and identify their USPs (unique selling proposition) and how they become more relevant to their customer. They have the opportunity to address their product offering, their supply chain and their inventory with a focus on sustainability and social responsibility. Gap should approach this with a focus on optimizing omnichannel, and making their stores more interesting and fun for their customer.”
“Gap Inc. needs a visionary, a merchant, a person with passion for clothes. Gap can’t recover without the right leadership. Art Peck was not a merchant. But these days it’s impossible to find a merchant with a sustained track record of success,” said one former retail ceo.
“The board could be saying, ‘Let’s not be blind to people outside the retail fashion industry,’” said the executive with knowledge of the inner workings of Gap Inc.
Another insider who could be a candidate is Neil Fiske, current ceo of Gap brand. He’s more merchant-centric than Peck and had the benefit of working with Leslie H. Wexner at L Brands, where Fiske ran Bath & Body Works, though he was never a buyer and came from Boston Consulting Group.
Among the recommendations for reviving Gap brand from industry experts:
• Simplify the corporation and cut the fat. It’s an overly complex business with too many people involved in too many projects, hampering the ability to focus on key initiatives. The spin-off of Old Navy is seen as a way to sharpen the focus and streamline the portfolio.
• Double down on denim. It’s the “heartbeat” of the brand and jeans are still the core of America’s wardrobes.
• Find leadership that gives investors peace of mind, conveys that Gap brand is still worth something, and that years of comp-sale declines can finally end.
• Continue to rationalize the store fleet. Gap had roughly 1,500 stores at the turn of the century in North America and now is down to roughly 800. Hundreds more are expected to close.
• Strengthen the notion of Gap brand as timeless, with a classic appeal bridging generations.
• Bank more on the online and outlet channels and less on malls where traffic is slowing and where Gap has historically been concentrated.
• Shine a brighter light on sustainability efforts and taking on social causes, which have been overshadowed by Gap’s poor financial performances. Athleta and Hill City have “benefit corporation” designations allowing them to pursue both profit and social good.
At other Gap Inc. divisions, the $2.5 billion Banana Republic has been showing some improvement and is profitable. Athleta has been on the fast track, with plenty of runway for store growth and is headed to $1 billion in volume soon. The company is also gradually growing Hill City, a men’s counterpart brand to Athleta, with new products and distribution channels.
When the plan to spin off Old Navy was announced, Peck said, “We have made significant progress executing on our balanced growth strategy and investing in the capabilities to position our brands for growth: expanding the omnichannel customer experience, building our digital capabilities and improving operational efficiencies across the company. Today’s spin-off announcement enables us to embed those capabilities within two stand-alone companies, each with a sharpened strategic focus and tailored operating structure. As a result, both companies will be well positioned to capitalize on their respective opportunities and act decisively in an evolving retail environment.”
While the spin-off would be a bold move forward, Elaine Hughes, founder and ceo of E.A. Hughes & Co. executive search, suggested some cultural stagnation. “Everyone has been arrested by a fear of trying something completely new and Wall Street punishing the stock if it is not an immediate success,” Hughes noted. “What is apparent is that those in retailing that are trying something new are winning and in some cases it isn’t purely about product, but also other factors such as convenience and integration of experiences and services. Failure shouldn’t mean death, but a learning experience to create success.”
