UNITED STATES – American apparel retail Gap Inc has revealed that its Chief Executive Officer Art Peck will leave the company at a time when the company is in the middle of a restructuring process aimed at cutting costs and increasing profit.
The announcement also comes at a time when the apparel retailer slashed its full-year earnings forecast, a move that sent its shares down by 7%.
Gap also now expects full-year adjusted earnings per share of $1.70 to $1.75, down from its previous forecast of $2.05 to $2.15.
Since taking the helm in 2015, Peck has tried to re-energize sales at the Gap brand which was once a trend setter with its casual logo emblazoned hoodies and Khaki cargos but is now struggling to keep pace with fast-fashion rivals such as Zara and H&M.
In early November, the company estimated a 4% drop in third-quarter same-store sales, with declines across all its key brands including Old Navy. The drop comes as the Gap brand also has heavily discounted in a competitive retail environment.
Camilla Yanushevsky, research analyst at CFRA, said “Gap’s whole portfolio is having a brand erosion crisis that we expect to only deepen with the current leadership vacuum.”
Earlier this year, Gap said it will separate its better-performing Old Navy brand and shutter about 230 stores of its namesake apparel business, a process likely to be completed by 2020.
Peck, who was to head the new Gap Inc, is credited with developing the company’s “omni-channel” strategy that uses its retail stores and its digital platform to fulfill orders. Many analysts are however of the opinion that the company’s dismal forecasts are an indicator that Peck’s efforts are yet to yield results
Gap said in a statement that Robert Fisher, a member of the founding family behind Gap and its non-executive board chairman, will become the chief executive officer on an interim basis, effective immediately