Gap (GPS) appointed Glenn Murphy, who ran a Candian drug store chain, as its new CEO. He has no clothing retail experience, but that hardly matters. Gap cannot be fixed in anything near to it current form.
Gap’s same-store sales fell 5% in June adding to an almost endless number of months of dropping figures. Revenue dropped from $1.51 billion to $1.45 billion during the month. The ongoing problems at the company have pushed its shares down 20% over the last two years.
In the quarter ending May 5, Gap’s income rose slightly to almost $3.6 billion, but gross margins and net both fell. The company closed its Forth & Towne unit during the period. Sales at the company’s flagship Gap brand fell 9% and the Old Navy brand dropped 5%. Drops in the same quarter in 2006 were just as bad if not worse.
Gap has 3,152 stores worldwide, which grew 3% over last year.
Gap;s new CEO could have come from any one of a number of retail companies or could be a turnaround executive. The company will need to close scores of stores and probably make sharp cuts in staff and outlets at the Old Navy brand. Design of the company’s merchandise will have to be overhauled. If that does not work, the number of outlets may not even be relevant.
The man from Canada is as good a choice as any.
Douglas A. McIntyre