The Gap CEO Out After Struggling to Grow Profits
Gap Inc (GPS) is facing new challenges with the head of its namesake brand leaving The Gap after failing to improve operations and profit growth to the liking of the clothing retailer’s chief executive.
The company, which also operates Banana Republic, Old Navy, and Athleta, said on Tuesday that Jeff Kirwan, president and CEO of The Gap, was leaving the company. He had been named to the job in late 2014 after several years at Gap Inc in other roles, and tasked with reinventing and improving the core business of a brand that generates 25% of Gap Inc’s total sales.
But in those twelve quarters with Kirwan at the helm, The Gap brand managed only one quarter of comparable sales growth, which came in its most recently reported quarter, despite the culling of many weak stores over the years. (Gap Inc will report fourth quarter results on March 1.)
Gap Inc CEO Art Peck has been trying to get Gap and Banana Republic, whose problems have been deeper than Gap’s, to borrow more from the playbook of sister chain Old Navy, which generates more than half of Gap Inc sales and is a true juggernaut. The company has been striving to improve the quality, fit and look of its products, be speedier with its supply chain and production at this twi brands to be able to jump on trends more quickly, something Old Navy has proven to be good at. Peck credited Kirwan for making progress on The Gap’s esthetics and ability to improve store traffic trends.
But getting that sharing of good practices to translate into stronger financial performances as The Gap and Banana Republic has proven to be elusive.
“We have not achieved the operational excellence and accelerated profit growth that we know is possible at Gap brand. As we move into the brand’s next phase of development, Jeff and I agreed it was an appropriate time for a change in leadership,” Peck said in a statement.
The company will look for a new president of The Gap but for now, Brent Hyder, current head of Gap Inc’s global talent and sustainability and former operations chief of The Gap, will oversee the brand. Wall Street firm Jefferies said in a research note that The Gap’s improvements of late “should elicit interest from strong replacement candidates.” Still, The Gap is facing off with not only traditional rivals such as Abercrombie & Fitch (ANF) and American Eagle Outfitters (ANF) but also with overhauled private label brands of major general chains such as Target’s (TGT) Goodfellow & Co and others.
Whoever does take the job could have a smaller realm to preside over. Gap Inc said in September it would close about 200 Gap and Banana Republic stores (the latest round of closings in recent years) while also opening 270 Old Navy and Athleta stores to expand the chains that are excelling. Indeed, though Old Navy generates half of sales, it represents about 70% of company profit, making The Gap a relative laggard in terms of boosting the bottom line.