CEO’s Who Need to Leave: Paul Pressler of Gap Inc. (GPS)

December 14, 2006 by Douglas A. McIntyre

Paul Pressler of Gap Inc. (GPS)

Shareholder groups are becoming more and more activist groups and this trend will continue in 2007.  Private Equity and LBO Groups can only acquire so many companies, and there are only so many candidates that can run behemoths.  The best way to see change is right at the top in many cases and there is a slew of US public companies that would do far better if they could replace current management.  These aren’t in any ranked order, so the first isn’t the worst and the last isn’t the best of the worst.  The problem in stating this is that it is very easy to come in and criticize, yet finding replacements for companies this size is not exactly an easy feat.  Private Equity as a sector has taken all the talented guys, and they haven’t stopped with the age limits that many public companies live by.  There just aren’t too many Lou Gerstner and Jack Welch carbon copies out there.

Paul Pressler has been given the benefit of the doubt for too long.  The new designers and the cheap looking image really needs a makeover.  The stock has recovered 25% after a lingering stench of a performance, but it is still down well more than 50% from the 1990’s and early 2000 high’s.  He stepped in when things were bad in 2003, yet here the company is still not in any great position and we are a few days shy of it being 2007.  This holiday season the company had good merchandise, but they drove away so much business almost permanently because the kids have the perma-thought that Gap clothes are lame.  It has essentially years of negative same-store-sales, and it isn’t getting better yet.  The company also needs to devise some mechanism of splitting itself up or selling off divisions.  He needs to go, and they really need to bust this pig up.  The only reason the company has recovered this much from its lows is because it is listed as a real potential target from private equity groups seeking a "value purchase."  Last time anyone checked, that isn’t exactly the street giving a ringing endorsement of a CEO.

Jon C. Ogg
December 14, 2006

This is part of "THE 10 CEO’s THAT NEED TO GO" series coming out today and tomorrow.  Jon Ogg can be reached at jonogg@247wallst.com; he does not hold securities in the companies he covers.