Mend that GAP

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But Drexler also knows Gap can't live on $78 jeans. Last year's push into more expensive leather, while successful, could not compete in volume with its earlier khaki campaign. So while basics have been pared a bit, they still form the foundation of every Gap store.

Gap is refocusing its marketing too. Its television-ad campaigns have been so dynamic that the 1998 series (khaki swing, khaki groove...) is included in the Whitney Museum of American Art's retrospective exhibit of the 20th century. But the company lost its advertising director, Lisa Prisco, and even good advertising can't move mediocre merchandise offered in a less than dynamic setting. Gap is shifting a portion of its $500 million marketing budget away from TV to make bigger in-store statements, using devices such as interior billboards. "We're focusing on dominant market imagery in the store," says Wilson.

Gap executives insist the spark--and growth--is far from over. All three brands own a mere 5% share of the $170 billion-a-year apparel market. And the company has barely scratched the surface overseas. Its online business, GapDirect, has tripled sales in less than three years, to $90 million, according to industry estimates. Gap maintains a "war room" in San Bruno, Calif., filled with color-coded graphs and maps showing carefully plotted opportunities where the company believes it can triple its business. This year alone, it plans to increase square footage 25%. The Gap will roll out 250 new stores; Old Navy, 100 to 120; Banana Republic, 40.

Consumers might prefer to buy an Old Navy T shirt for $12.50 rather than spend $16.50 for a similar one at the Gap. But executives insist that Old Navy's success isn't coming solely out of the Gap's back pocket. Although half of the Old Navys are within a mile of a Gap, they siphon away just 5% to 10% of Gap's business. The rest comes from somebody else. "It's a temporary hit, but the volume comes back," says COO Wilson. "We'd rather cannibalize our own business than have the competition do it."

The company is also working on new store concepts. Mindful of the success of such stores as Victoria's Secret and Sephora, it's been breaking out merchandise categories such as lingerie and personal care into stand-alone stores called GapBody. The company now has 28 GapBodys, and it seems likely that scores more will be opened this year. Soon there won't be one square inch of you that can't in some way be touched by a Gap.

The moves appear to be working. Gap stores' comp sales are beginning to move up, and the company's stock has bounced back from its low of $30.81 in October to $51.69 at last Friday's close. Analysts are again touting the magic of Mickey with "buy" recommendations. "Whatever their issues are, I would be hesitant to bet against them," says Todd Slater, an analyst at Lazard Freres. "It's one of the few companies to endure for a generation. It's thrived, evolved and led the industry."

Nice words, but they will never make Drexler happy. At any given moment during shopping hours, he may be making one of his legendary visits to some Gap Inc. store somewhere, unannounced, asking, as usual, what the company could be doing better. "I could ask what did we do right," he says. "But that's obvious."