Company Perspectives

At Gap, Inc. we never stop moving. It takes thousands of passionate, dedicated and talented employees around the world to deliver the merchandise and shopping experience our customers expect and deserve. From color to concept, it all begins with inspiration--whether it's people-watching on the streets of Tokyo, a flash from a dream, or a visit to a local art gallery.

Key Dates:
1969: Don and Doris Fisher open their first store in San Francisco, California. 1976: The company offers 1.2 million shares to the public. 1983: Millard Drexler is named president; the firm acquires Banana Republic. 1986: The first GapKids store is opened. 1987: The first international store is opened in London. 1990: BabyGap is launched. 1994: The Old Navy brand is established. 1997: The Gap Web site debuts. 2002: Drexler retires; Paul Pressler is named CEO.

Company History:
Founded as a single store by Donald G. Fisher and wife Doris, The Gap, Inc. has evolved into a major retail company with well known brands, including its namesake, Banana Republic, and Old Navy. The firm sells a variety of casual-style and urbane chic clothing to men, women, and children in over 4,250 stores across the United States and in Canada, France, Japan, Germany, and the United Kingdom. The Gap flourished through the 1980s and 1990s under the leadership of Millard "Mickey" Drexler but has battled tough times in the early years of the new century. Drexler retired in 2002, and Paul Pressler was named CEO while Fisher remained chairman. Capitalizing on the Generation Gap: 1969-75 Donald Fisher was not of the generation to whom The Gap owes its popularity. A member of a family that made its home in California for generations, Fisher was 40 years old and a successful real estate developer in 1969 when he took note of a new trend among the city's increasingly disaffected youth. Blue jeans, for years made chiefly by Levi Strauss & Co. for laborers and outdoorsmen, were suddenly becoming a part of the counterculture's standard costume. Durable, cheap, comfortable, and acceptably offbeat, jeans were the perfect uniform for a generation of young people anxious to demonstrate its antipathy to corporate America. Fisher was said to have conceived of The Gap when he was unable to find the right size of Levi's in a department store in Sacramento, California. He realized that jeans had become more popular than current merchandising outlets could accommodate, and like hamburgers, stereo equipment, and gasoline, they could be sold through a chain of small stores devoted solely to that product. With the help of his wife, Doris, Fisher opened a shop near San Francisco State University in one of his own buildings, offering a combination of records and jeans. Their intention was to attract jeans customers by means of the records, but at first no one noticed the jeans, and Fisher was driven close to bankruptcy. In desperation, he placed ads in local newspapers announcing the sale of "four tons" of jeans at rock-bottom prices, and the clothes were soon gone. To emphasize the youthful ambiance of his new store, Fisher named it The Gap, an allusion to a then hot topic, the Generation Gap. When Fisher incorporated his business as The Gap Stores, Inc., it was an immediate success. Although the Fishers had no experience in retailing, their stores' combination of jeans, low prices, and wide selection proved

however. prompting nine separate class-action suits from outraged stock purchasers who alleged that the Fishers had tried to dump their holdings before The Gap announced its bad news. Rather than wage endless litigation. The value of the newly issued stock fell to $7. ensuring a minimum of disappointed customers. and uniform pricing. and the Fishers were busily attempting to break out of the jeans niche by expanding The Gap's selection of clothing. These proved crucial to the company's short. the Fishers were ready to make their first substantial public stock offering. Fisher added new outlets in San Francisco and was soon enjoying the benefits of chain store merchandising: centralized buying andadvertising. Two years after opening its first stores. Mickey Comes to Town: 1981-86 .'s decision to supply big mass marketers such as Sears and J. the 1980 figures represented an achievement. These charges came despite the fact that the Fishers sold only about 10 percent of their holdings during the period in question. The Gap Stores' buying program was singularly uncomplicated. by 1975 Gap stores generated $100 million in net sales. however. and did its best to mend its frayed relations with Wall Street. The Gap settled the suits in 1979 for a total of $5. The company's spectacular growth had attracted widespread interest. and the number of stores had grown to 186. exclusively Gap 25-year-olds. Gap stores were enlarged to handle increasing amounts of what became known as casual wear and were frequently moved outside of shopping centers to freestanding locations. created during the 1970s. Levi's were now sold everywhere. Penney with its jeans.000 square feet. light jackets--each offered in its complete range of colors and sizes." and usually enlivened by rock and roll music. or 40 cents per share.C. filled with circular metal display racks known as "rounders. Analysts credited the company's success to the Fishers' observance of a few cardinal rules of retailing: Gap stores replaced itsstock with maximum speed. The jeans market was no longer quite so straightforward.irresistible to the huge market of 14. where space was plentiful and rent lower per square foot. many of them enclosed in malls. pushed the company into the red for the final quarter of its fiscal year. To hold down rental costs. purchasing.5 million annually.and long-term health.000 to 4. The company's growth was also made possible by the extensive national advertising of Levi Strauss. rather than being retired in favor of new styles simply for the sake of novelty. Coincidentally.25. Such dependence on a single supplier had obvious dangers. big sellers were kept on the rack until they stopped moving. excellent name recognition. they opened stores across the United States while maintaining tight control over the critical accounting. often orange. Along with the search for a line of clothes to appeal to an older clientele. jeans by Levi Strauss & Co. when combined with The Gap's large expenditures for new stores. shirts. the retail industry went into a steep slide. generated about 45 percent of Gap sales in 1980. as well as national brands other than Levi's. Initially. and more conservative. spread over 21 states. with Levi's adding an equal amount and other national brands making up the balance. which provided 100 percent of The Gap's merchandise during its early years. wealthier. products. Adding between 50 and 80 stores annually. however.2 million shares sold quickly at $18 per share in May. sales had increased almost 50-fold. as the stores carried only one product. ending July 31. The Gap's sales were running at $2. and around 1973 The Gap began marketing several labels of its own. Considering that ten years earlier essentially all of The Gap's sales were Levi Strauss & Co. the Fishers kept stores small--about 3. but it was clear that if the company were to avoid inundation by the rising tide of jeans discounters it would have to fashion a new. to $97 million. the Fishers also faced Levi Strauss & Co. and marketing functions of what was soon a sizable corporation. They located most of their stores in shopping centers. and the Fishers converted the company into a public corporation. With extraordinary celerity. and only a few items were stocked--jeans. In five years.8 million. though they retained the great majority of stock. the company could pay such a figure without undue strain. Several experimental chains featuring upscale fashions were essayed and brought together under the Taggs name but later liquidated because they were unprofitable. Members of the great wave of youngsters who had come of age wearing blue jeans in the 1970s were now older. The Gap pushed its sales to $307 million in 1980 and was close to achieving nationwide representation. The stores were brightly painted. The company's own brands. and its offering of 1. underscoring The Gap's need to develop a label and look of its own. By the end of the 1970s. which. its prices were low and stayed that way. Ups and Downs: 1976-80 By 1976.

and they were enormously successful in helping to change the public's perception of the company. a description that fit a vast number of U. Drexler began by eliminating all private label brands but one: Gap. just plain ugly.S. Despite the mixed results of the Banana Republic acquisition. Its orange-painted stores were cluttered with rounders displaying merchandise of many labels that Drexler later described to the New York Times as "trendy but not tasteful . Levi Strauss products were kept but relegated to the background. It was clothing for people who wanted to look and feel young without appearing slovenly or rebellious. Gross launched the "Individuals of Style" campaign. The two-store chain of safari and travel clothing outfits. In addition. he became president of AnnTaylor in 1980. had a well-established catalogue business. skirts. made of natural fibers. however. Drexler. That same year. In the meantime. in spite of the company's currently excellent financial status. who was contemplating the future of The Gap. Drexler created a large in-house design staff to develop clothes that would be casual. profits. Melvyn and Patricia Ziegler. the word "stores" was dropped from the company's name. and more clearly differentiated by gender than were jeans. for better and worse. A few years later. founded in 1979 by another California husband and wife team. simple. henceforth. with profits down 43 percent to $12. By the middle of the following year. . featuring comfortable. Donald Fisher hired Millard "Mickey" Drexler as president in 1983. then 40." Worst of all. consumers in the 1980s. where his work caught the eye of Donald Fisher. after several problematic years. The new president found little that he liked. The Gap came to mean good taste of an informal variety. The ads stressed style. the company continued to seek out other chain stores. The concept was a huge success. had just solved a similar problem with AnnTaylor. Drexler was born in the Bronx to a family with roots in the garment business and by age 23 was a buyer for Bloomingdale's. shifted from radio and television to upscale magazines and newspapers and featured older models engaged in familiar. and same-store sales were all up. The look was informal but classic--still denim-based but including a variety of shirts. The company's advertising. and along with Banana Republic (which peaked in the late 1980s with revenue of more than $250 million a year) figured largely in The Gap's long-range planning. Drexler accepted the job as president at the end of 1983 (sales $480 million) and was given a block of stock that would make him one of the country's wealthiest retail executives. the company had fresh energy and a merchandising focus that could carry it for years to come. Magdalena (Maggie) Gross. The Gap would be known not only as a store. it was liquidated in 1986. Drexler sought to fill another clothing need of the baby boomer generation with the debut of GapKids. proliferating competition in jeans and The Gap's youthful marketing image had forced the company into a price-driven volume business.To accomplish this task. Pottery Barn was a housewares chain of about 30 stores in New York and California.2 million. well. and financial results for 1984 were poor. Banana Republic's sales doubled each year through the mid-1980s but slowed quickly thereafter. and the brand name Gap soon acquired the cachet needed if the company were to compete with other retailers of casual wear such as Benetton and The Limited.. whose clothes did not always appear in all of the photos. blouses.. but as a line of clothes as well. not The Gap. outdoor activities that were not necessarily connected with the youth culture. After a stint at Macy's. Neutral grays and white replaced the garish orange. creating a more chic image for the chain and quadrupling sales in the bargain. Drexler immediately began The Gap's wholesale transformation. it was clear he had pulled off something of a miracle. The Gap had acquired a number of other retail chains. and the ubiquitous rounders gave way to shelves of neatly folded clothing under soft lighting. and sweaters in assorted colors and weaves. Gross revenue. most consumers perceived The Gap as strictly for teenagers at a time when people who grew up in the 1960s were developing more upmarket tastes. bought by The Gap in 1983. more importantly. as devised by Drexler's longtime colleague. a series of black and white portraits of both famous and unknown subjects by a team of celebrated photographers. After its acquisition and the introduction of private-label clothing lines. It would be difficult to overcome The Gap's 15-year tradition as the place where kids went to pick up a pair of Levi's. durable clothes for the children of parents who shopped at Gap stores. Foremost among these was Banana Republic. Drexler's revolution at The Gap cost a good deal of money. Gap stores were substantially revamped.

Canada. The Gap debuted GapScents and continued to broaden its age range and clothing lines to include work attire. and 40. New directions for GapKids and babyGap included plush toys. The Gap decided to try its wares outside the United States. and 131 Old Navy. neither the Hemisphere mistake or the demise of Pottery Barn was serious enough to cause more than a few tremors at the parent company. GapKids prospered and launched a new venture. yet the result had been more successful than Donald and Doris Fisher ever imagined. Hemisphere offered elegant fashions but soon ran afoul of a severe recession. In the early 1990s. and freestanding babyGap stores.216 stores in the United States. Lacking the trademark flare associated with the company. and return-on-equity were all outstanding ($2. The Gap's statistics were robust: a two-for-one stock split paid out dividends in March. 4 in Japan. other non-clothing items. Like its sibling.507 Gap-owned stores (188 were Banana Republic) contributing to the company's $3. To shore up its product line. Along with refurbishing stores and placing more emphasis on women. had blossomed with more new products. Yet perhaps the biggest news of 1995 was Donald Fisher's decision to . Banana Republic's safari gear bubble burst. sales leapt 18 percent to nearly $4.680 stores-210 Banana Republic. personal care items. Hence Old Navy Clothing Company. originally called Gap Warehouse.e. value-priced (20 to 30 percent lower) clothing for the entire family. 49 in the United Kingdom. Not only had The Gap followed its Baby Boomer clientele as they grew older and wealthier. $229. a sharper focus on women. including footwear. Banana Republic was busy refocusing its image while GapKids and babyGap flourished. and five new stores in Canada. a nine-store chain of upscale U. was gaining ground with urbane elegance as a hip alternative to The Gap's casualness. Canada. with plans to expand total sales area by 15 percent annually. and its first international store was opened in London. Despite the circumstances of its birth. net income. The Gap's transition from a discount jeans warehouse to a sleek fashion arbiter was not altogether painless.The Gap Continues Its Climb: 1987-96 By 1987. though. as Banana Republic searched for secure footing. Banana Republic.8 million. while Gap and GapKids lost some of their momentum. and 3 in France) to 91 in Canada. although babyGap maintained its prominence. exceeding the company's hopes for its newest division. jewelry. it provided for their children. The Gap also tested the higher end of the clothing market with Hemisphere. Banana Republic. meanwhile. 902 Gap. revenue. Within a year.72 billion in sales. the "grunge" and "slacker" looks). In 1990. the Fisher family still held more than 40 percent of the company. 437 GapKids. and leather accessories. Likewise.9 billion in sales with net earnings of $144. GapKids was the fastest-growing segment of the company as a whole. because for some it had become increasingly cool not to spend money on clothes (i. Additional stores soon sprang up throughout the United Kingdom.092 stores pulled in $1. stateside. with most of the more than 223 GapKids stores housing a babyGap department for infants and toddlers. Old Navy increased its market share by doubling in size. The Gap was looking very good indeed: a stock split occurred in September.5 billion. there were 1. the upscale clothier initiated a shop-within-a-shop concept.2 percent respectively due to another stock split in June) in 1991 and virtually every year since Drexler's program had taken effect in 1985. and France. whose spectacular rebirth in the Drexler era left ample room for such experimentation. there were 1. and the United Kingdom. babyGap was a phenomenal success and became a popular attraction in GapKids stores. sportswear with European styling. Created in 1987. and at year-end the company's 1. Then when strolling in Paris with colleagues.S. 55 in the United Kingdom. once a blemish on the perfect Gap picture. By 1994. babyGap. the company addressed these problems by turning away from unisex clothing to more gender-specific items. with stores nearly twice as big as other Gap stores. the same year the company broke $1 billion in sales. At the same time. In 1991. and 2 in Germany in 1995. Drexler saw the perfect moniker for the down-market stores painted on a building: Old Navy. too. Though 1992 marked a dip in profits and sales growth due to slower turnover and increased competition. International stores had surged from 1994's 124 (72 in Canada. Disposed of only two years later. Drexler hired an outside to firm to come up with a new name to no avail. and it became a money-losing liability. and net earnings rose 11 percent to $354 million over the previous year's $320 million. Overall. For the start of a new decade. Old Navy became another Gap sensation.5 million. which now operated more than 1. filled with sturdy..4 billion. featuring different collections. Unfortunately. 12 in France. The Gap came back with record numbers in 1993 and a new franchise.

however. sales began declining. the firm launched another round of highly successful television commercials--this time the star being its line of khaki pants. and Cynthia Rowley paid "tribute to the little company that became master of the universe. The new century. an executive from Walt Disney Co.6 billion. The Gap--its name formerly a quirky play on generational unrest-came to mean the ultimate in fashion and taste for both younger and older generations. one whose management style could catapult The Gap back into the upper echelon of retail fashion. the company opened 731 new units and sales grew to $13. Nino Cerruti. net income fell to $877 million while comparable store sales fell by 5 percent. After Drexler's departure. the company created a global monitoring program to supervise factory conditions where its clothes were manufactured. Sales climbed to $9 billion the following year. During 2000. In 1997. and still kept a hand in running the company he founded nearly 30 years before. Not surprisingly. Paul Pressler. Gap Inc. and khakis. According to the National Post. By 1996. The Gap grew at a rapid clip during the latter half of the 1990s. Banana Republic and Old Navy began catering to online shoppers shortly thereafter. Pressler knew he had his work cut out for him. Carolina Herrera. As such. On the other new advertising. and ultimate sale of every item with its name in-house. however. the company had grown by 24. who added the responsibilities of CEO to those of president." Indeed. The industry even honored the company in the April issue of Elle when such high-brow designers as Giorgio Armani. Despite these distinct challenges. shipment. changed fashion for not only baby boomers but for generations to come. Net income for fiscal 2002 bounced back to $477 million. Drexler's reign at The Gap had become one of the retail industry's amazing success stories. packaging. Disaster struck in 2001 when the company posted a $7. along with gapkids. bolstered by the opening of 356 new stores. If The Gap's clientele was not quite as broad as some department stores or mass marketers. Late 1990s and Beyond By the late 1990s. Its merchandising is unfocused and it has lost ground to competitors. He later took a job to head up rival J. In 1998. The Gap maintained exceptional quality and consistency in an increasingly erratic marketplace. sales at Old Navy surpassed $1 billion while overall company sales grew to $6. its sophistication and ever-growing consumer base more than made up for it." wrote Anne Kingston of theNational Post. brought with it rocky times for the 30-year-old retailer. Various labor groups claimed The Gap advocated sweatshop labor overseas. 570 new stores were added to the company's arsenal as net earnings exceeded $1. with its burgeoning cluster of stores and subsidiaries. and Luscious Jackson. especially through vertical integration. "The Gap has lost its and babygap. In 1999. consumers of all ages could find something in one of its stores. LL Cool J. The Gap. The retail environment in 2003 remained fiercely competitive. Fisher remained chairman. securing record sales and earnings. Crew Group Inc.5 billion. By keeping the design. The Gap's success was in no small part due to Donald Fisher's and Mickey Drexler's business acuity. In response. and the economy remained questionable. Todd Oldham.7 million loss. The Gap's dominance of the fashion scene was fixed. manufacture. The formula that made it great no longer has the same currency. prices were down." Though it began with a singular purpose. display.1 billion. and store closures. inspection. Drexler felt The Gap had strayed too far into the trendy genre and was losing customers as a result. both Pressler and Fisher were convinced that The Gap and its brands would carry on as a mainstay in the retail fashion world in the years to come. The company also began its foray into e-tailing and introduced gap. More damningly. Inc. the company was losing market share in the over-30 category and was having difficulty appealing to a younger audience. The Gap had also come under fire for its labor practices in third-world countries. however. "Simply put.. was tapped to revive the company just as Drexler had been called up to do in the 1980s.relinquish his duties as CEO of The Gap. In April 2000. strategic planning. Thanks to Drexler's efforts. Fisher began his search for a new leader. emphasizing a return to simplicity and the company's most basic offerings--pocket tee's. Pressler began to implement a series of sweeping corporate changes focused on customer research. That year. has alienated shoppers. he retooled The Gap's image in 1997. Drexler announced his retirement during 2002. jeans. . His successor was Mickey Drexler. The company could now claim that one new store opened each day. the firm went back to television advertising with commercials that highlighted Gap Easy Fit jeans featuring wellknown celebrities that included Lena Horne.000 percent from 1984 to 1999. Long-time advertising director Maggie Gross left the firm after Drexler pulled the plug on a print campaign that did not gel with The Gap's new basic image.

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