NEW YORK (FORTUNE Magazine) - Gap's clothes have lagged the trends, and its product mix has been off, which has dragged down same-store sales 13 of the past 14 months; the stock fell 30 percent in the past year.

An exodus of executives, inconsistent marketing messages, heavy discounting, tired-looking stores, and tough competition have earned CEO Paul Pressler the nickname "DMW" -- for dead man walking.

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To revive the Gap brand, Pressler's hired a new fashion director and marketing chief. And he's testing a more colorful store concept to replace Gap's stark boxes.

He's made sure that the stores are starting the year with lean inventories; that, combined with a new system to source goods closer to stores to speed deliveries, should help reduce the need for discounting.

Gap (Research) has a strong brand, and the stock is cheap; it trades at a P/E of just 13.5, vs. an average of 20 for specialty retailers. But we would be cautious right now.

Pressler has proved he can cut costs and improve operations but has yet to show his mastery of merchandise. Retail analysts have been underwhelmed by Gap's spring lines but are hopeful the fall collections will be stronger.