Gap’s sinking stock wipes billions from Fisher family wealth

askjh June 10, 2017

By Thomas Lee, San Francisco Chronicle

The Fishers are one of the wealthiest families in San Francisco, thanks in large part to the historical success of international apparel retailer Gap Inc. But over the past three years, Gap’s struggles, reflected in its sagging stock price, have weighed heavily on that wealth — at least on paper.

In early 2014, Doris, John, William and Robert Fisher collectively owned 370.2 million shares, according to documents filed with the Securities and Exchange Commission. With Gap’s stock trading around $41 per share at the time, the value of the family stake was about $15 billion.

Had they kept all their stock, the Fisher’s stock holdings in 2014 would be worth $8.5 billion today, a 42 percent decline.

But they sold plenty: Gap’s most recent proxy statement showed that the four family members together own 202.5 million shares, now worth about $4.7 billion at Friday’s closing price of $22.83.

In short, the Fishers are a lot less wealthy than they were three years ago.

The company and the family declined to comment.

Donald and Doris Fisher founded Gap in 1969. Seven years later, the company went public and grew into one of the largest and most successful clothing chains in the United States. Today, Doris Fisher and her sons John, William and Robert, who serves as chairman of the board, own about 44 percent of the retailer. (Donald Fisher died in 2009.)

Normally, stable family ownership of publicly traded firms boosts shareholder value, said Mary-Hunter McDonnell, an assistant professor of management at the University of Pennsylvania’s Wharton School. Family members, especially those who served as executives like Robert and William Fisher, are intimately familiar with the business and what made it successful in the first place.

But like many apparel retailers, Gap has struggled in recent years as shoppers flock to the Internet to purchase shirts, pants and shoes. More worrisome for Gap, its basic styles of clothing have lost favor with shoppers. Fast-fashion chains like H&M and Zara, which can introduce merchandise faster than traditional apparel chains like Gap and J. Crew, are grabbing market share.

“Gap’s clothing is completely out of sync in the United States,” said Burt Flickinger, managing director of Strategic Resources Group consulting firm in New York. “The assortments are very weak.”

Given these circumstances, family ownership could hurt investors, because the Fishers may be too loyal to the founder’s vision, McDonnell said. They may not want to make the dramatic changes needed to transform the business, she said.

The Fishers are doubtless watching what’s happening at Nordstrom, another struggling publicly traded retailer controlled by a family.

The Nordstroms, most notably Chairman Emeritus Bruce Nordstrom, still the largest shareholder, said last week that they are considering a plan to take the Seattle upscale department chain private. Blake, Peter and Erik Nordstrom serve as co-presidents, and James Nordstrom is president of stores.

As with Nordstrom, taking Gap private might offer the Fishers breathing room to fix the company without having to worry about Wall Street, Flickinger said.

Since 2013, Gap has reduced its store space, measured in square feet, by 4 percent and boosted e-commerce sales to 16 percent of annual sales, or about $2.5 billion, according to Morningstar.

But its strategies have yet to produce results, analysts say.

“Cost reductions will not reinvigorate top-line growth,” Bridget Weishaar, a retail analyst for Morningstar, wrote in a recent research note. “We are concerned that company investments in a responsive supply chain, omni-channel capabilities, geographic expansion, and better design have had little effect in sustained same store sales growth.”

The question is what the Fishers will do if the value of their Gap holdings continues to deteriorate. The family is quite active in philanthropy and social issues, including the arts, environment and charter schools. A decline in wealth may make it more difficult for them to support these causes.

Gap needs time to recruit fresh apparel designers and a top-notch real estate executive to renegotiate leases with mall owners, Flickinger said.

Exiting the public markets would also allow the Fishers to continue to fund their philanthropy without the risk, McDonnell said, of angering shareholders who might worry about the family’s diverted attention.

“For a family as charitably minded as the Fishers, going private would make a lot of sense,” she said.