‘You barely knew what we were actually selling’: Gap CEO Richard Dickson on the brand’s heavy discount strategy

New Gap CEO Richard Dickson has spoken about his experience upon joining the struggling company from toy business Mattel in August.

“You barely knew what we were actually selling,” he said on Wednesday, describing how the firm’s four apparel brands had leant heavily on promotions and discounts.

Dickson was addressing an audience at Voices, a conference organized by apparel industry website The Business of Fashion, in Oxfordshire, U.K. Displayed behind him on stage was a screenshot of Gap’s website where money-off messages were a prominent part, which Dickson said was typical of the company’s brands “a few months ago.”

“To some extent, the clarity of the conversation with consumers just needed an edit. Our product is a great product, but it’s lost in the message,” Dickson added.

Gap announced third-quarter earnings earlier this month, which outperformed analysts’ expectations, but its holiday sales forecast was muted. Revenue at its flagship Gap brand was down 15% year-over-year and same-store sales slid 1%. Excluding the sale of Gap’s China business and the shutdown of Yeezy Gap, sales fell 6%. Shares are up about 78% in the year to date.

Dickson took on the CEO role at Gap after an almost 10-year tenure at Mattel, where he was president and chief operating officer. He is widely credited with reviving the company’s Barbie brand, whose sales were seeing double-digit falls at the time he joined in 2014.

“She just didn’t reflect what was culturally relevant,” Dickson said of the doll. “Moms had turned actually away from loving Barbie to feeling put off by Barbie,” he added. The company introduced different body types and ethnicities for Barbie, which helped with the turnaround, and the blockbuster “Barbie” movie became the highest-grossing U.S. release of 2023 in August, making $575.4 million in North America and $1.35 billion globally.

“People thought when I left: ‘you’re crazy,'” Dickson said of leaving Mattel for Gap. “You’ve got this blockbuster movie … a great team … and you’re going to this company in a transformation. [But] that to me – I would be crazy not to do it,” he said.

The Gap company is made up of four brands: Athleta, Old Navy and Banana Republic, along with its namesake banner. “These are incredible brands but need to have differentiation amongst each other. Copy, font, typography, every detail of a brand needs to be communicated with precision … and what you’re going to start to see is the evolution of that journey unfold in every one of our brands,” Dickson said.

Dickson talked about the “origin story” of Gap, which started life as a San Francisco store selling “Levi’s, records and tapes,” in 1969. Founders Donald and Doris Fisher originally planned for the outlet to be named “The Generation Gap,” Dickson said, as they wanted different age-groups to shop there. But Doris Fisher crossed out the word “Generation” and the store became simply “The Gap.”

Dickson said Gap needs to “hearken back” to this story, “and figure out: What is that ‘cultural conversation’ today?” he said.

An advertising campaign for jeans, featuring a woman trying on different denim styles, using “The jeans. The jeans. The jeans,” as a tagline is a “hint” of where Gap’s ads might go, Dickson said.

“We need to take swings. We need to take risks. We need to encourage our community to fail fast … This is a great example of the creativity being unlocked and going back to the origin story of denim,” he added.

– CNBC’s Gabrielle Fonrouge contributed to this report.