Shares of The Gap, Inc. (GPS) dropped 8.1% in the after-market hours, as the textile-apparel retailer posted sales data for September and announced the change of its Chief Executive Officer (CEO).
Following a challenging environment, the company’s sales for the 5-week period ended Oct 4, 2014 came in at $1.48 billion, up nearly 1.4% year over year. Comparable store sales (comps) for September remained flat, compared to a 3% fall last year, as a result of weakness witnessed at the Gap Global brand, offset by improvement seen at the Banana Republic Global and Old Navy Global brands.
Comps at the Gap Global brand descended 3%, same as last year. On the other hand, Old Navy Global and Banana Republic Global comps climbed 1% and 2%, respectively, following a 2% and 5% respective decline last year.
Moreover, Gap made some forecasts for the third quarter of fiscal 2014. The company envisions gross margin for the third quarter to be slightly lower than last year, owing to the weakness at the Gap brand. Also, despite tough cost management, the company anticipates operating expenses for the quarter to be roughly 8% above the last year level.
Further, in a separate press release, management announced the retirement of its current CEO, Glenn Murphy, to be succeeded by Art Peck from Feb 1, 2015. By working simultaneously, Murphy and Peck have enhanced the company’s financial position.
Murphy has been CEO for seven years straight, and under his guidance, the company’s financials have shown an impressive record. Additionally, his leadership enabled Gap to acquire new brands and expand its operations overseas by introducing stores in about 10-50 countries.
On the other hand, Peck, who joined Gap nearly nine years back, currently serves the company as president of its Growth, Innovation and Digital unit. With his able leadership skills, he has been taking the Piperlime, Intermix and Athleta brands forward, apart from designing omni-channel strategies for the company.
Gap is optimistic about Peck’s role as CEO as it believes that he has the required management and development skills to take the company smoothly forward on its transition path. Also, the company named Bob Fisher as non-executive Chairman of the Board.
Gap currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Citi Trends, Inc. (CTRN) and DSW Inc. (DSW), each with a Zacks Rank #1 (Strong Buy), and Abercrombie & Fitch Co. (ANF), carrying a Zacks Rank #2 (Buy).
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