Art Peck, who led The Gap through a tumultuous five years of sagging sales and a fading image as a trendsetter, “stepped down” as CEO yesterday. Robert J. Fisher, son of founders Doris and Don Fisher and the company’s current non-executive chairman, is replacing him on an interim basis.
“The news comes as the company is splitting into two publicly traded companies, one for its Old Navy brand and another for the Gap, Banana Republic and its lesser known brands like Athleta, Intermix and Hill City, the AP’s Anne D’Innocenzio and Joseph Pisani write.
“Like many mall-based clothing chains, Gap is struggling to turn itself around as shoppers go online or to discounters like T.J. Maxx for their clothing. But Gap, which defined casual dressing in the 1990s, has also long struggled with its own deep-rooted problems -- its offerings have failed to stand out from that of its rivals,” they continue. “Peck had been promising investors that a turnaround is in the making. But instead, the chain has struggled with sales declines, and has had to keep discounting its merchandise to get customers into its stores.”
The company’s news release played up Peck's contributions to the tech side of the business.
“Under Art’s tenure as CEO, we have made progress investing in capabilities that bode well for the future such as expanding the omni-channel customer experience and building our digital capabilities,” Fisher said.
“Peck, a former consultant, prized data over design as Gap CEO,” writes Micah Maidenberg for The Wall Street Journal. “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,” Maidenberg continues.
“It wasn't enough to turn the iconic retail brand around. Since stepping into the top role in 2015, Peck has tried to steer the company through some of the most challenging years in its history. Gap’s stock value has plummeted by more than 50% in four years due to falling sales, rising inventory levels and significant drops in revenue,” Katie Burke points out in San Francisco Business Times.
“Peck was expected to stay on with Gap through the spinoff, and Wall Street responded poorly to the announcement Thursday. Gap’s (GPS) stock plunged 12% during after hours trading. The company also warned investors of weak sales during the third quarter and unexpectedly trimmed its guidance for the remainder of the year,” Nathaniel Meyersohn reports for CNN Business.
“This was a challenging quarter, as macro impacts and slower traffic further pressured results,” CFO Teri List-Stoll states in the news release. The company will release it third quarter earnings results on Nov. 21.
“Despite sales woes, Peck received a 33% pay increase in 2018, according to a Securities and Exchange Commission filing. When combined with stock awards, Peck’s total salary package reached a total of $20.8 million,” Bethany Biron writes for Business Insider.
“Peck also received criticism in September for describing Banana Republic as a ‘skinny brand,’ when commenting on the brand’s lack of size inclusivity. Banana Republic sells clothing up to size 16 in stores and size 20 online, though in an interview with Bloomberg, Peck said he would like to go up to size 26 or larger,” Biron continues.
“Plenty of other leaders have effectively taken the blame for Gap’s woes in the Peck era,” observes Bloomberg’s Sarah Halzack.
“Rebekka Bay, Gap’s one-time creative director, was pushed out in early 2015 after Peck was named CEO. Marissa Webb, creative director at Banana Republic, departed later that year. Andi Owen, the president of Banana Republic, departed in 2017. Jeff Kirwan, president of Gap brand, was axed in 2018 as the brand struggled with major inventory management issues. Owen and Kirwan, in particular, had been handpicked by Peck to lead a comeback,” Halzack writes.
While fashions come and go, it helps to have a consistent vision guiding strategy.
“As the Board evaluates potential successors, our focus will be on strong leadership candidates with operational excellence to drive greater efficiency, speed and profitability,” Fisher stated yesterday.
Apparently, though, an eye for what’s next would help, too.