By Phil Wahba
NEW YORK (Reuters) - Gap Inc
The Gap chain strayed from what it was best known for, namely high-quality jeans and casual clothes with an American aesthetic, and must go back to what initially made it successful, the head of Gap North America told Reuters at the company's design center in Manhattan.
"What's expected of us is pretty clear. I think it's been us who've kind of wandered around," Art Peck said on Wednesday, on the eve of the retailer's investor day.
Peck, 56, oversees the Gap stores, but not the company's Old Navy and Banana Republic chains.
He replaced Marka Hansen in February, when Chief Executive Glenn Murphy shook up senior management, saying North American sales were disappointing. The problem has been most acute in womenswear.
Those management changes included the dismissal of Gap's head designer, who has still not been replaced.
Industry experts and analysts say that Gap has confused shoppers in recent years by adding and pulling so many lines of clothing, making it unclear to them what they could find at Gap that they couldn't elsewhere.
"They were not able to hold on to that unique space they had," said Wendy Liebmann, chief executive of consultancy WSL Strategic Retail.
Peck intends to remedy that. Though he's only been on the job for a few months, Gap's shelves have begun to reflect his back-to-basics-with-a-twist approach and will become even more noticeable during the upcoming holiday season.
He wants to build on the success of Gap's 1969 brand of high-end jeans, which analysts have lauded and has been a hit.
For example, Gap has added more color to its denim jeans and introduced skinny jean leggings with animal prints as well as colored corduroy leggings, which Peck said have sold well so far. Peck said there will also be more color in women's jeans in its spring line.
Gap's more formal, sober clothes for women fell flat, Peck said, proving that the chain should stick to what it does best.
Gap's Body Fit line of yoga and casual clothing for women, launched last year in a direct challenge to Lululemon Athletica
CLEANER PRESENTATION
Peck isn't crazy about how Gap displays clothes on the sales floor. So another change he is implementing is to stack fewer units on top of one another to reduce the clutter that makes shelves look like discount bins and use more elegant shelving to give the clothes a more sophisticated air.
"We have far better product in our stores than we're getting paid for," Peck said.
Hired in 2005 from the Boston Consulting Group, Peck, an avid runner and cyclist, oversaw corporate strategy before being tapped three years later to head the outlet unit, which operates stores under the Gap and Banana Republic brands.
Gap's sales in the United States and Canada have languished for years, a decline from the chain's heyday in the 1980s and 1990s as the go-to retailer for casual American style.
Sales at North American stores open at least a year fell by at least 5 percent in six of the last seven years and have kept falling this year. In September, they slipped 4 percent.
It has faced competition from specialty retailers like Abercrombie & Fitch
Gap operates about 970 stores and plans to lower that to 700 by 2013.
The chain frequently offers deep discounts and will continue to do so this holiday season, but Peck said the focus needs to shift away from price and onto the clothes.
"We need to start talking about the merits of the product versus the merits of the deal."
Having clothes that shoppers actually want is the best way to reduce the need to resorting to the discounting that has dented Gap sales and margins.
"If you have compelling merchandise, people will buy it whether it's on sale or not," said Edward Yruma, a KeyBanc Capital Markets analyst who covers Gap.
Peck recognized that Gap must lure a younger generation of shoppers, which means selling clothes that stay true to Gap's image but aren't just the same old clothes.
"Predictability ultimately means you fade into the background," Peck said.
(Reporting by Phil Wahba in New York, editing by Bernard Orr)
