Gap said on Thursday its chief executive Art Peck will step down, as the retailer struggles to win back customers amid softer sales.
Shares in the company dropped more than 8 per cent in after-hours trading, after Gap announced Mr Peck’s departure and warned that its profits this year will be smaller than previously forecast.
Gap, the owner of Banana Republic and Old Navy, has recorded weaker sales in recent quarters with mall traffic on the decline and consumers shifting more of their spending online. Gap said comparable sales — an important metric for retailers — were down 4 per cent in the third quarter, versus Wall Street’s expectations for a 2.2 per cent drop.
Robert Fisher, a member of Gap’s founding family who currently serves as non-executive chairman, will replace Mr Peck as chief executive on an interim basis following a brief transition period. Mr Peck, who took the helm at Gap in 2015, will also give up his seat on the board.
“Under Art’s tenure as CEO, we have made progress investing in capabilities that bode well for the future such as expanding the omnichannel customer experience and building our digital capabilities,” Mr Fisher said in a statement.
Gap cut its forecast for full-year earnings to a range of $1.70 to $1.75 per share on an adjusted basis, versus prior guidance for $2.05 to $2.15. Analysts were looking for $2.07.
It also projected adjusted earnings per share of between 34 cents and 36 cents in the third quarter, well below analysts’ estimate of 55 cents.
The company announced early this year it would spin off the better-performing Old Navy to focus on turning around its other stores.
Its namesake locations fared worst in the September quarter, with comparable sales down 7 per cent. Comparable sales at Banana Republic and Old Navy slipped 3 per cent and 4 per cent, respectively.
“This was a challenging quarter, as macro impacts and slower traffic further pressured results that have been hampered by product and operating challenges across key brands,” said Teri List-Stoll, chief financial officer.
Gap’s shares have declined nearly 30 per cent on the year.