Gap CEO Art Peck to Step Down--Update
November 07 2019 - 10:11PM
Dow Jones News
By Micah Maidenberg
Gap Inc. said Chief Executive Art Peck will step down
immediately and be succeeded on a temporary basis by Robert Fisher,
the son of the company's founders.
The apparel maker, which is spinning off its Old Navy chain, has
struggled for years with sluggish sales. On Thursday, it warned of
another quarter of weak sales and lowered its profit targets for
the year. Shares tumbled 7% in after-hours trading.
Mr. Peck, who joined Gap nearly 15 years ago and became CEO in
2015, also will relinquish his board seat. He will leave the
company after a brief transition, Gap said.
Mr. Fisher, who is Gap's chairman and a board member since 1990,
was previously interim CEO.
In February, Mr. Peck announced a plan to separate the rapidly
growing Old Navy budget brand from the rest of the business,
creating two publicly traded companies in 2020. Mr. Peck was
expected to remain CEO of the parent of Gap, Banana Republic and
Athleta. On Thursday, a Gap spokeswoman said the separation is
continuing as planned.
Mr. Peck's compensation since he became CEO adds up to about
$40
million, according to Equilar, a compensation data firm. The
tally
includes stock appreciation after equity grants, though Mr.
Peck's
outstanding option awards are under water. Equilar valued Mr.
Peck's
departure package, including 18 months of salary, at about
$3.7
million, plus a potential year-end bonus based on company
performance.
The split was an acknowledgment of how much of its once-powerful
grip on U.S. consumers Gap has lost, as shoppers shifted to
fast-fashion chains such as H&M and Zara. Old Navy now exceeds
the original Gap brand in sales.
But on Thursday the company warned that sales were falling
across its brands. Global comparable sales at the Gap brand dropped
7% in the fiscal third quarter ended Nov. 2, while those for Banana
Republic dropped 3%. Old Navy's global comparable sales fell
4%.
On Thursday, the company said it expects adjusted earnings per
share of $1.70 to $1.75 for the current fiscal year, compared with
its previous forecast of $2.05 to $2.15 a share.
Finance chief Teri List-Stoll blamed difficult market conditions
and company missteps, noting the Gap's brands face product and
operating challenges. "There is more work to do," she said in a
news release. "We know these brands are capable of delivering."
Mr. Peck, a former consultant, prized data over design as Gap
CEO.
He eliminated the chief creative positions at the company's
brands and put operational executives in charge. He closed hundreds
of stores and shortened production lead times to better match
supply with demand.
Nevertheless, profit is down more than 20% since Mr. Peck was
named CEO in 2015, while sales over that period barely budged. Net
income totaled $1 billion for the year that ended in February, down
from $1.26 billion in 2015. Sales over that period increased less
than 1% to $16.58 billion.
Mr. Fisher's parents, Doris and Don Fisher, opened the first Gap
store in 1969, selling denim and other casual clothes. The chain
went on to open hundreds of stores and dressed a generation in its
brightly colored T-shirts and khaki pants.
It acquired Banana Republic, which sold clothes more suitable
for the office, in 1983, and launched the lower-priced Old Navy
chain just over a decade later.
Retail veteran Mickey Drexler powered Gap's rise in the 1990s
but was forced out of the company in 2002 after a sales slump and a
clash with the Fisher family. The company rotated through several
CEOs, including former Walt Disney Co. executive Paul Pressler and
drugstore executive Glenn Murphy. But it was never able to retain
its former glory.
This is the second time Mr. Fisher is stepping into steer the
company. He served as interim CEO in 2007 after Mr. Pressler was
pushed out.
--Theo Francis contributed to this article.
Write to Micah Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
November 07, 2019 21:56 ET (02:56 GMT)
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