3 things Gap needs to fix to turn its struggling business around

Gap needs a new game plan — and fast.

In April, the retailer announced the departure of the head of its Old Navy business, which was hit by marketing missteps and supply chain snarls after being a driver of company growth during the pandemic.

Then in July, Gap CEO Sonia Syngal abruptly stepped down after about two years on the job as sales continued slumping and challenges mounted.

Gap has since named a new leader for Old Navy, who took over just earlier this month. But it still needs a permanent leader to guide the overarching business — which includes its namesake brand, Banana Republic and Athleta — back to expanding its revenue.

Gap is scheduled to report its fiscal second-quarter results Thursday afternoon, and the company has said it expects sales for the period to decline a high single-digit percentage from a year ago.

Steep markdowns to clear bloated inventories are expected to hurt gross margins, with Gap forecasting its adjusted operating margin in the quarter to be flat to slightly negative.

Analysts are forecasting the company to report a loss of five cents per share on sales of $3.82 billion, according to Refinitiv estimates. That would represent a 9% drop in revenue from the year-earlier period.

Gap shares are down more than 40% so far this year, as of Tuesday’s market close.

Dana Telsey, chief executive officer at Telsey Advisory Group, described the company as suffering from “choppy performances across brands, uncertainties in leadership and direction, and a lack of visibility to stabilization with a clear plan for recovery.”

Here are three things that Gap needs to get its business in better shape.

The company has been without a leader since Syngal left last month, casting uncertainty over its future.

Bob Martin, Gap’s executive chairman, has been serving as interim president and CEO, with Syngal helping out for a brief transition period. But analysts and investors want to see a permanent replacement with a strong track record.

Jane Hali & Associates retail analyst Jessica Ramirez said she would like to see a CEO with a strong background in retail merchandising who will push the company to innovate — particularly at its Banana Republic division, which she said needs to find a new identity coming out of the pandemic.

Banana Republic, once a destination for workwear, is trying to adapt as more people work from home or opt for more laid-back styles.

“Gap seems to just constantly miss what the consumer is looking for,” Ramirez said. “There’s something that just doesn’t stick.”

Old Navy, know for its budget-friendly clothing for kids and adults, has been crucial to Gap’s success and accounted for more than half of the company’s global net sales of $16.7 billion in fiscal 2021.

The business was on such a tear that in 2019 Gap said it was going to spin Old Navy into a separate publicly…