Resources

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.

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.

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.”