SAN FRANCISCO — Gap Inc.’s board is firmly behind chief executive officer Art Peck even though the retailer he helms continues to struggle.
Chairman Bob Fisher opened the company’s annual shareholder meeting Tuesday with an expression of support for Peck. “We remain confident in Art’s ability to lead this journey,” he said with the caveat that, “We recognize transformation won’t happen overnight.”
Peck, who was attending his second shareholder meeting as ceo, has labeled the year since he stepped into the post in February 2015 a period of “rebuilding” and “transition.” It’s been a rough transition, indeed. Gap’s first-quarter sales dipped 6 percent to $3.44 billion, and comp-store sales fell 5 percent.
Analysts are grim about the prospects for a near-term turnaround at Gap, but Fisher and Peck painted a cheerier picture. Fisher extolled the strong management team Peck has assembled, including Sonia Syngal, Old Navy’s recently appointed global president, which he said is “focused on the right strategies that will enable the business to deliver into the future.”
Addressing shareholders, Peck zeroed in on two ideas to push Gap forward: acceleration and distortion. “What is undeniable is an accelerating pace of change around how consumers are engaging brands, how customers are shopping, where they go for information, how they explain their affiliation with brands,” he said. “When I say acceleration is one of my words, it is accelerating the change we began to take on many months ago.”
Despite persistent merchandise stumbles, Peck and Fisher underscored Gap has enhanced its product capabilities. In the first-quarter earnings conference call, Peck detailed Banana Republic had become more trendy than its customers desired and the chain has retrenched to classic positioning, and that Gap is focused on a casual, optimistic American aesthetic.
“At our core, we win one T-shirt and one pair of a jeans a time,” said Peck. “We win because of the emotional connection we build between the products we have in our stores and the joy people get from wearing those products.”
Known for his digital prowess prior to assuming the ceo post, Peck underscored the importance of having a digital-first mentality and being at the forefront on mobile. He pointed out the bulk of Gap’s digital traffic today is on mobile. “That is a radical change from where the world was even a year ago,” he said, stressing, “If we don’t engage our customers where they are, they will engage with someone else.”
To help draw customers via mobile and social-media platforms, Peck suggested Gap should “pivot our marketing voice to the channels our customers are engaged on.” He noted the single largest influence on Gap’s customer is Pinterest, and it’s critical for Gap to shape the conversations on such platforms.
In response to a shareholder’s question, he also acknowledged Amazon as a dominating force in retail and hinted Gap could up its e-tail exposure. “To not be considering Amazon and others would be, in my view, delusional,” he said, adding, “We are always considering all of the opportunities beyond our traditional mix of channels and stores…Amazon is certainly one and there are others as well.” In China, he commented, Gap has a robust presence on Tmall.
On the topic of distortion, Peck pronounced Gap should “distort our energy toward the places were we can win.” He singled out Athleta, the activewear concept with 100-plus stores, as a winning proposition, mentioning that estimates predict active apparel will command one-third of the global apparel market by 2020.
Peck also emphasized that Gap concentrates on not just “what we do,” but “how we do it,” and lamented its philanthropic message hasn’t adequately reached the public. Gap has committed to educating 1 million women by 2020 through P.A.C.E., a program for women who make its clothes. “We are going to have these things show up because they matter to our consumers, and we are now in the process of building this into our brand voice,” he said.
Peck is pursuing charitable, digital, product and streamlining initiatives — the company is in the process of closing 175 North American stores — under intense pressure to improve Gap’s performance. The retailer’s stock price has plunged around 50 percent in the past year, reflecting concern not shared by its executives during the annual meeting over Gap’s ability to reverse course.
“We very much view today’s stock price as an aberration,” Sabrina Simmons, executive vice president and chief financial officer at Gap, told shareholders. “We are very much focused on getting back on track.”