GAP INC. WAS ONE OF THE LEADING INTERNATIONAL SPECIALTY RETAILERS OFFERING CLOTHING,
accessories and personal care products for men, women, children, and babies under the
Gap, Banana Republic, Old Navy, and Forth & Towne brand names. The company primarily
operated in North America. The company recorded revenues of $16.023 billion
during the fiscal year ended January 2006, a decrease of 1.5% over 2005. The operating
profit of the company was $1.79 billion during fiscal year 2006, a decrease of
4.2% over 2005. The net profit was $1.113 billion, a decrease of 3.2% over 2005. Gap
was ranked 52nd (2005 ranking—40th) by the Business Week Interbrand survey conducted
in August 2006. It was valued at $6416 million ($8195 million in 2005). (See Exhibits 1
and 2 for Gap’s financial results.)
Paul Pressler (Pressler), who became Gap Inc.’s CEO in October 2002, had been heralded
for his cost-cutting strategies that had restored financial discipline in the company. But there
was a trade-off, analysts said. Pressler, who had little retail experience, did not steer Gap toward
its customers’ tastes. Realizing his mistakes, Pressler changed his strategy in mid-2004
to generate growth. Would he succeed in rejuvenating Gap Inc. and attracting customers once
again?