Gap Inc. changed directions turning more attention to online sales as Chief Executive Officer Glenn Murphy announced his retirement. Starting February 1st, his place will be taken by Art Peck, head of digital business.
After the news Gap shares fell by 9% in the after-hours trading session. In the same statement, Gap Inc reported September sales going up to $1.48 billion, just one percent change compared to last year. Murphy said September “proved more challenging than expected”.
The 52-year-old CEO will step down after seven years as head of Gap Inc. In an interview about her view on this decision, Dorothy Lakner, an analyst at Topeka Capital Markets, said: “Investors really like Glenn and don’t what to see him go, while people know Art Peck, maybe they feel they don’t know him quite as well as Glenn.”
During his time as CEO Mr Murphy successfully acquired a number of smaller companies and totaled a shareholder return of more than 160%. Also managed to double the price of Gap Incs shares.
His successor Art Peck, 58, headed Gaps North America business, which is reported to be responsible for more than three-quarters of the companys sales, in 2011 and 2012.
In an interview with Reuters Bridget Weishaar, Morning Star analyst, said: “I think he has the relevant experience necessary to continue to execute on ongoing strategic initiatives, including global expansion, digital and margin expansion.”
In the future Gap Inc will continue to expand to newer markets as a measure to compensate the fall in sales, due to heavy competition in the face of Zara, Uniqlo and others.
At the end of 2013 the company had 80 stores in China. In a conference call Art Peck said: “Well have 110 stores in the country by the end of this year and we predict China can become a billion-dollar market for Gap in the coming years”. As a part of the growth plan the company is also looking to open stores in India, Costa Rica, Paraguay, Hungary and Brazil.
On Wednesday, Gap Inc rose by 1.7% in New York to close at $41.90 per share, making a one-year change of +6.86%. Shares slid as much as 9.1% in extended trading after the news broke out. The company is valued at $17.92 billion. According to the Financial Times, the 28 analysts offering 12 month price targets for have a median target of $46.00, with a high estimate of $53.00 and a low estimate of $35.00. The median estimate represents a 9.79% increase from the last price of $41.90.
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