Glenn Murphy, who led a turnaround at the Gap that has evidently stalled, announced yesterday that he would leave the company early next year, turning over CEO duties to Art Peck, a former consultant and an eight-year veteran of the San Francisco-based retailer who currently serves as president of its growth, innovation and digital unit.
Investors were initially kerfuffled by the news, which was coupled with a “disappointing” report of flat sales for September, Bloomberg’s Lindsey Rupp reports, with shares “[sliding] as much as 9.1% in extended trading in New York after the management change and sales results were announced. The stock had risen 1.7% to $41.90 at the close of trading for a 7.2% advance so far this year.”
“Investors really like Glenn and don’t want to see him go,” Topeka Capital Markets analyst Dorothy Lakner tells Rupp. “While people know Art Peck, maybe they feel they don’t know him quite as well as Glenn.”
The transition — the first “seamless” one in 20 years, as Murphy made a point of pointing out — will take place Feb. 1.
“After taking over in mid-2007, Mr. Murphy closed outlets and cut costs in a bid to stem losses,” Hiroko Tabuchi reports in the New York Times. “He has also spruced up Gap’s stores with cheerier colors, big redesigns that placed dressing rooms at the center of the store, and on-site stylists. Under Mr. Murphy, Gap also made a big push online, expanding its e-commerce offerings, and overseas, expanding Gap’s presence to 50 countries from 10.”
Murphy also oversees the Banana Republic, Old Navy, Piperlime, Athleta and Intermix brands. Yesterday, the outgoing chairman and CEO said that “September proved to be more challenging than we expected” in a release accompanying the sales report for the five-week period ended Oct. 4. “While Old Navy and Banana Republic are performing well, we are working aggressively to ensure our entire portfolio of brands delivers to its potential.”
Murphy, 52, tells the Wall Street Journal’s Suzanne Kapner that he had informed the board he didn’t want to commit to executing another three-year plan. “I’m in my eighth year, and I told the board that if we find the right candidate, we should do that,” he said.
On a conference call with reporters and analysts yesterday afternoon, as Kapner reports, Murphy fleshed out his reasoning: “Anyone who has their handprints on long-range plans needs to be there for the execution.”
Yesterday, “Murphy was praised for expanding the group’s presence into 50 countries and for targeted acquisitions of smaller-scale brands that showed good growth potential,” reports Elizabeth Paton in Financial Times. “During his tenure, Gap said, the company delivered a total shareholder return of more than 160%.”
“He’s created the path forward for the smooth and seamless transition our shareholders and employees deserve,” said Bob Fisher, the son of the founders Doris and Don Fisher, who was named non-executive chairman yesterday. “Art Peck is an inspiring leader who thinks big, brings out the best in people, and understands how retail is changing today,” he added.
Peck “was instrumental in repairing the retailer’s flagship brand in North America a few years ago,” writesFortune’s Phil Wahba, which included closing 200 underperforming stores. Not that he’s got anything against brick and mortar.
“I steadfastly believe in store. I steadfastly believe in digital,” Peck said yesterday. Wahba reports that “he has accelerated Gap’s efforts to integrate” the two.
“Peck, who has an MBA from Harvard and worked at Boston Consulting Group for two decades, joined Gap in 2005 to help with its international strategy,” reportsBloomberg Businessweek’s Susan Berfield. In his first blog post “as the new president of the long-troubled Gap stores in North America in 2011,” Berfield related, Peck wrote: “Who am I? If you Google me, you won’t find much.”
That has — and will continue — to change, Berfield offers.
But what won’t drastically change, perhaps, is the Murphy game plan that has lessened the gap between a vision born in 1969 by a co-founder who opened a retail store because he “couldn’t find a pair of jeans that fit” and the reality of running a global operation with six brands, nearly 3,600 stores and not quite 140,000 employees in the age of the Internet of Things.
“I don't think there will be a massive shift in strategy going forward,” Morningstar analyst Bridget Weishaar tells Reuters’ Yashaswini Swamynathan. “I think [Peck] has the relevant experience necessary to continue to execute on ongoing strategic initiatives, including global expansion, digital and margin expansion.”