With Back-to-School Approaching, Gap Seeks New Grip on Shoppers

School's out, but that's not the case for Gap Inc. as the beleaguered apparel chain scrambles to regain its footing during the all-important back-to-school season. The retail giant has been under consistent pressure to reverse sliding sales, though it has seen recent glimmers of progress. Over the course of its 47-year existence, $16.2 billion Gap Inc. has endured many ups and downs. Core to the struggle is an identity crisis, both in merchandise and marketing, as well as in brand voice. At a time when consumers are awash in messaging and apparel choices, many are searching for strong values reflected in the retailers they choose to shop. Gap simply hasn't passed the test. Instead, the company has frequently stepped too far away from its best and most successful brand personalities: wear-to-work at Banana Republic, basics at Gap and fun yet whimsical products at Old Navy, said experts. "At the end of the day, what does Gap stand for—who are they?" asked Mark Cohen, director-retail studies and adjunct professor of marketing at Columbia Business School. "The only thing that resonates for them is 40% off the entire store, and that's not even that exciting for many consumers." Though some analysts praised recent products at the Gap brand, noting trendy off-the-shoulder tops and shortall jeans, they said better marketing is needed to alert consumers. "We have not had strong marketing in the first half of the year," CEO Art Peck admitted in a recent conference call. He has emphasized an increased reliance on social media and word of mouth, but after pulling back on TV in the second quarter, he promised a return to TV this summer for Old Navy. After a miserable holiday season, Gap Inc. reported a 6% decline in first-quarter net sales to $3.44 billion, compared with the year-earlier period. Though the company recently reported a 2% uptick in same-store sales in June—its first monthly positive same-store sales in more than a year—experts still worry about the likelihood of a full-scale turnaround. "While Old Navy made progress in June with a 5% same-store sales and solid margins, we are looking for evidence of consistency," wrote Michael Binetti, a retail analyst at UBS Investment Bank, in a research note. Mr. Peck, who declined to be interviewed, is an 11-year Gap veteran credited with using his digital prowess to modernize stores; he also directed the decision to acquire athletic brand Athleta for $150 million in 2008. A year ago, Mr. Peck, taking a page from fast-fashion rivals, pledged to reduce the time it takes to get product into Gap stores. He's rebuilt that production pipeline so that it is now quicker and more efficient, according to a spokeswoman. Mr. Peck has also shrunk the retailer's bloated store count—150 outposts were eliminated in fiscal 2015, and another 25 are slated for closure over the next few years. He promised improved marketing, which totaled $127 million in the quarter, a 7% drop over last year. "All of our brands have been focused on an aggressive agenda to improve our product offerings and performance—ultimately, returning the brands to growth and relevance," said a Gap Inc. spokeswoman. Shortly before Mr. Peck took the reins, the company eliminated its global CMO roles at Gap and Banana Republic as part of a restructuring. Analysts expected the strategy to reenergize the brands, yet sales continued to fall. Earlier this year, Mr. Peck hired Craig Brommers, who had worked at teen retailer Abercrombie, as CMO for the company's namesake label. Old Navy, too, has contended with personnel problems. Sales sputtered after the brand lost global president Stefan Larsson, lauded for injecting a dose of fast-fashion into Old Navy's product mix, to Ralph Lauren last fall. Though Gap Inc. recently filled that position from within, the company is now searching for a new CMO at Old Navy after the March departure of Ivan Wicksteed. Experts say the brands click best with consumers when advertised separately. To that end, Gap Inc. has worked with different agencies for its brands, such as Wieden & Kennedy for Gap and Chandelier Creative for Old Navy. "They've been the most successful when each brand has had its own personality and its own marketing objective," said Gabriella Santaniello, president of retail researcher A-Line Partners. It's a long way from Gap's marketing heyday. The brand first introduced its famed "Fall into the Gap" tagline four decades ago. In the go-go '90s, success continued as consumers flocked to Gap's jeans and khakis and the brand's inclusive messaging. In recent years, Gap struggled, rotating celebrity designers for its namesake brand and toying with a logo redesign, quickly retracted amid shopper uproar. Meanwhile, the company is pumping marketing dollars into Athleta, taking advantage of the label's popularity as the athleisure movement gains steam. Gap is not alone in its struggles. Macy's, Kohl's and Nordstrom have all seen their share of dismal earnings results this year. And Gap is up against an increasingly strong competitor in American Eagle Outfitters, which has drawn consumers through messages of body positivity. "It's great to be a timeless brand, but you have to thread the needle," said Kevin Keller, E.B. Osborn professor of marketing at Dartmouth College's Tuck School of Business. "The extent to which you try to blend classic and contemporary with the Gap brand—they can play with that audience, but it's also making sure that people appreciate what the brand stands for and what its values are."

With Back-to-School Approaching, Gap Seeks New Grip on Shoppers

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