Gap brand CEO Jeff Kirwan to leave retailer, shares fall

(Reuters) - Gap Inc GPS.N said on Tuesday it was disappointed with the progress at turning around the fortunes of its eponymous brand and that the head of the business, Jeff Kirwan, was leaving.

FILE PHOTO: A Gap Inc. retail store is shown in La Jolla, California, U.S., May 17, 2017. REUTERS/Mike Blake

The surprise move comes just over a week before the apparel retailer is to announce fourth-quarter results. Gap shares were down 3.2 percent in mid-day trading, easing from a decline of as much as 7.6 percent.

“While I am pleased with our progress in brand health and product quality, we have not achieved the operational excellence and accelerated profit growth that we know is possible at Gap brand,” Gap Inc’s Chief Executive Officer Art Peck said in a statement.

The company is trying to tackle muted sales and a shift in consumer preference to online shopping by spending more to refresh underperforming lines, spruce up online offerings and bring new styles quicker to its stores.

Gap Inc raised its 2017 earnings and same-store sales forecasts in November, likely reflecting traction with those initiatives. But those efforts are shining through mostly at Old Navy, while Gap, the company’s second-highest revenue generator, finally turned a corner only in the third quarter.

“While we remain confident in Old Navy’s ability to post solid results against difficult comparisons, we have less confidence in an operational turn at Gap banner in the short to medium term,” KeyBanc Capital Markets analyst Edward Yruma said.

Yruma expressed concern that the issues around the brand’s products, perception and store fleet “may be difficult to fix.”

The analyst said Kirwan had led the Gap brand since December 2014. Kirwan is not featured on the leadership section of Gap Inc’s website.

Same-store sales at Gap, known for its mid-priced clothes, fell more than expected for most of fiscal 2016. The declines have slowed this fiscal and comparable sales rose 1 percent in the third quarter.

Analysts though expect sales dipped 0.17 percent in the holiday quarter, according to Thomson Reuters I/B/E/S.

“I think it’s just frustrating because in their last earnings report there was a lot of optimism that Gap was making a come back and at this point it indicates it really has not,” said Gabriella Santaniello, CEO of retail consultancy firm A-Line Partners.

“Ultimately this is the right decision.”

Brent Hyder, Gap Inc’s head of global talent and sustainability, will oversee the Gap brand in the interim. Hyder was previously chief operating officer of the Gap brand.

Reporting by Subrat Patnaik in Bengaluru; Editing by Sayantani Ghosh and Savio D’Souza