New York (CNN Business) --
In 1969, real estate investor Don Fisher opened a store in San Francisco geared toward teens and college kids that offered Levi's jeans as well as records and cassettes.
Fisher planned to call the store "Pants and Discs," but his wife Doris came up with the winning name: "The Gap," referencing the generation gap.
The Gap capitalized on denim's rise in popularity as the go-to attire of a generation of young Americans and later expanded it to khakis, t-shirts, tank tops, sweatshirts and other staples.
The brand won over everyone from moms to office workers to celebrities like Sharon Stone, who wore a black Valentino skirt and a $26 low-rise Gap turtleneck to the Academy Awards in 1996.
Back then, the company was a symbol of cool, casual style.
"As ubiquitous as McDonald's, as centralized as the former Soviet Union, and as American as Mickey Mouse, Gap Inc. has something for you, from the cradle to the grave," said The New York Times in 1992.
But sales of Gap's flagship brand have been plummeting for years and it has become secondary to many American shoppers.
The company's other brands, such as Old Navy and Banana Republic, have also had problems.
On Monday, the company announced that its CEO, Sonia Syngal, will step down after less than three years.
She will be replaced by an interim CEO while the company searches for a permanent leader.
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This is what awaits the next Gap CEO:
Overexpansion and competition
Gap took advantage of the expansion of suburban shopping malls in the 1980s and 1990s, becoming one of the largest mall stores in the United States.
So its fate has largely been tied to that of the malls, great news in the '90s but terrible news now.
Shopping malls have rapidly lost customers to online and superstore shopping.
Gap said in 2020 that it would close 30% of its Gap and Banana Republic stores in North America by 2024, most of them in malls.
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In the decades since the mall's heyday, Gap has lost touch with the Baby Boomers who grew up with the brand and failed to attract the Gen Z and Millennials who drive fashion trends today, analysts say. .
At the same time, brands and retailers like Levi, Target and fast-fashion sellers H&M and Zara attracted denim shoppers from the Gap.
Online direct-to-consumer brands have also dented Gap's audience.
Gap is a long way from its heyday.
"When they were big, the ecosystem of smaller, niche players just didn't exist," said Ken Pilot, a former Gap chairman and a longtime company executive.
"Gap was competing against the department stores and killing them."
Gap has also cannibalized its own brand with similar styles at Old Navy and Banana Republic, adding: "It was clever the way they built their portfolio, but even that created its own form of competition to the Gap brand."
Gap has tried various strategies to reinvigorate its flagship brand, including a collaboration with Kanye West for a Yeezy-branded clothing line, but hasn't significantly lifted sales.
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Its initiatives "have been piecemeal, rather than part of a larger coherent revitalization plan," Neil Saunders, an analyst at GlobalData Retail, said in a note to clients on Monday.
In addition, the flagship brand is less and less important to the company.
Old Navy and Athleta are its future: Combined, they will account for about 70% of Gap's total sales by 2023, according to the company.
leadership mistakes
Whoever becomes the new leader of Gap will not be the first of its CEOs to face challenges.
Mickey Drexler, known as the "merchant prince," was the man who built Gap into a powerhouse during the 1990s. First president of Gap's division and later CEO of the company beginning in 1995, Drexler drove Gap's expansion beyond blue jeans to khakis and oversaw the creation of the Old Navy budget chain in 1994.
But it was also during Drexler's tenure that Gap lost its connection to its core customers.
He suffered 24 straight quarters of sales declines toward the end of his tenure, resigning in 2002.
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The company then went through several CEOs, including former Disney executive Paul Pressler, pharmacy executive Glenn Murphy and Gap veteran Art Peck.
Sonia Syngal took over from Peck in 2020.
"Gap's failure has to do with its lack of leadership," said Mark Cohen, director of retail studies at Columbia University's business school.
"They had a brilliant period of growth and popularity, which they squandered."
More recently, Gap tried to spin off Old Navy, now the company's biggest brand.
But he reversed course in 2020 after falling sales.
Since then, Old Navy has continued to struggle, even with a failed attempt to revamp the sizing to make it more inclusive.
Initially, the size received praise, but the brand ended up having too many extra-small and extra-large items and not enough of the more popular half sizes.
In May, Old Navy said it was winding down this strategy.
Old Navy's "challenges are taking much longer than expected to work out," Susan Anderson, an analyst at B. Riley Financial, said in a note to clients on Tuesday.
"A new set of eyes across the company could be good for the brand."
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