Gap shares fall on disappointing sales at Banana Republic

AP News
Posted: Oct 08, 2015 7:48 PM

NEW YORK (AP) — The creative director for Gap's Banana Republic brand is stepping down after 18 months in that role.

The move announced Thursday comes as the chain, which also operates Old Navy and Gap stores, reported a sharp drop for a key revenue measure in September for the upscale brand. It marked the third-straight month of declines that were all in the double digits.

Marissa Webb, who was hired to re-energize the Banana Republic brand and is known for her oversized jackets, will transition into a creative-adviser role "affording her more time to focus on her own collection," Gap Inc. said in a statement. The company said that it will continue to be a minority investor in Web's label M Webb LLC. The move will be effective Oct. 16.

The San Francisco-based retailer also offered a disappointing outlook on profitability for the current quarter.

It stock fell $1.50, or 5.2 percent, to $27.45 during aftermarket trading. Through the close of regular-session trading Thursday, the stock is down 31 percent since the beginning of the year.

The personnel change marks the second big management change in a week. It underscores the latest challenge facing Art Peck, the company's CEO who took over the helm of Gap in February to turn around the business.

Last week, Gap announced that its Old Navy President Stefan Larsson, had resigned and is taking the CEO job at Ralph Lauren Corp. Larsson, who took over the top spot at Old Navy three years ago, spearheaded the brand's growth and has made it a star of its portfolio.

The company has long been struggling to turn around its Gap namesake business and improve business at Banana Republic. And executives had said they wanted to use Old Navy as a model for performance.

Sales in stores open at least one year were flat at Gap stores, but fell 10 percent in Banana Republic in September. At Old Navy, the measure rose 4 percent.

The San Francisco company said in a pre-recorded call that women's clothing sales "unexpectedly decelerated" at Banana Republic in September. Banana Republic is currently discounting its merchandise by 40 percent.

"Banana Republic has been fortunate to have Marissa's passionate, creative leadership for the past year and a half," said Gap spokeswoman Liz Nunan, in a statement emailed to The Associated Press. She noted that Banana Republic will not fill the creative director spot at this time.

Overall, sales in stores open at least a year slipped 1 percent for September. But analysts were expected a 1.3 percent decline, according to Thomson Reuters. The figure is a key metric of retailer's health because it excludes sales from locations that have opened or closed in the past year.

Total sales during the five-week period ended Oct. 3 fell 1 percent to $1.46 billion from $1.48 billion a year ago.

Gap Inc. now said it expects its gross profit margin rate for the third quarter to be similar to the second quarter.


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The headline of this story has been corrected to show that the Gap creative director stepping down, not out. The story has been corrected to show that sales in stores open at least one year were flat at Gap stores, not down 3 percent.