DIpil Das
On November 7, 2019, Gap Inc. announced the Art Peck, President and CEO, will step down from his position after 15 years, following a brief transition. Effective immediately, Robert J. Fisher will serve as President and CEO on an interim basis. Fisher has a 35-year history with Gap and is part of the founding family: His parents opened the first Gap store in 1969. Fisher has served as Nonexecutive Chairman since 2015, has served on the board of directors since 1990, and has over 35 years with the Gap in various positions, including interim President and CEO.
The board of directors appointed Bobby Martin, chair of its compensation and management development committee, as lead independent director. Martin has served on the board since 2002 and as lead independent director from 2003 to 2015.
Comparable Sales Have Been Declining, Particularly at Gap Global
In conjunction with the announcement, the company reported comparable sales for the third quarter, ended November 2, 2019, were down (4%) versus flat for Gap Inc. The company reported the following comparable sales by brand:
Source: Company reports [/caption]
The Gap’s Game Plan, Presented at 2019 Investor Day
At the company’s Investor Day on September 12, 2019, Peck reported the company’s strategy moving forward was to rally its iconic brands, Gap and Banana Republic, and improve profitability. See figure 2, below, for details on the company’s plan.
At the Gap brand, Peck said the company planned to “lead with denim” and improve the fit and style by leveraging product operating model transformation to reduce waste. The company also highlighted its fleet optimization goal, as it had also outlined in its March 2019 earnings call. The company announced plans to close 230 Gap stores in the next two years, mainly in North America.
[caption id="attachment_99331" align="aligncenter" width="700"]
Source: Company reports[/caption]
On February 28, 2019, Gap announced it would create two independent publicly traded companies: Old Navy, its category-leader in clothing and accessories; and, another business called NewCo to include Gap, Banana Republic and other brands such as Athleta and Hill City. The separation was expected to be completed by 2020 at the time of the announcement, and management did not update this information at the time it announced the change in leadership. The company has a regularly scheduled board meeting next week.
Gap Lowers Guidance
The company now expects 2019 adjusted diluted earnings per share guidance range of $1.70-1.75 versus previous guidance of $2.05-2.15.
- Gap Global: (7)% compared to (7)% last year
- Banana Republic Global Brands: (3)% versus 2% last year
- Old Navy Global: (4)% compared to 4% last year
Source: Company reports [/caption]
The Gap’s Game Plan, Presented at 2019 Investor Day
At the company’s Investor Day on September 12, 2019, Peck reported the company’s strategy moving forward was to rally its iconic brands, Gap and Banana Republic, and improve profitability. See figure 2, below, for details on the company’s plan.
At the Gap brand, Peck said the company planned to “lead with denim” and improve the fit and style by leveraging product operating model transformation to reduce waste. The company also highlighted its fleet optimization goal, as it had also outlined in its March 2019 earnings call. The company announced plans to close 230 Gap stores in the next two years, mainly in North America.
[caption id="attachment_99331" align="aligncenter" width="700"] Source: Company reports[/caption]
On February 28, 2019, Gap announced it would create two independent publicly traded companies: Old Navy, its category-leader in clothing and accessories; and, another business called NewCo to include Gap, Banana Republic and other brands such as Athleta and Hill City. The separation was expected to be completed by 2020 at the time of the announcement, and management did not update this information at the time it announced the change in leadership. The company has a regularly scheduled board meeting next week.
Gap Lowers Guidance
The company now expects 2019 adjusted diluted earnings per share guidance range of $1.70-1.75 versus previous guidance of $2.05-2.15.