Gap CEO Art Peck steps down amid slumping sales, stock price

Photo: The Canadian Press

Gap CEO Art Peck

Gap announced Thursday that CEO Art Peck is stepping down as the company struggles to turn around a long-standing sales slump.

The San Francisco-based retailer also lowered its earnings outlook for the year as sales at the Gap, Banana Republic and Old Navy fell in the most recent quarter.

The company's stock tumbled 7% to $16.75 in after-hours trading following the announcement. The shares were trading at around $41 when Peck took the CEO spot in early 2015.

Effective immediately, Robert J. Fisher, Gap's non-executive chairman of the board, will serve as president and CEO on an interim basis. Fisher is the son of Gap's co-founders Donald and Doris F. Fisher.

"As the board evaluates potential successors, our focus will be on strong leadership candidates with operational excellence to drive greater efficiency, speed and profitability," he said in a statement.

The news comes as the company is splitting into two publicly traded companies, one for its Old Navy brand and another for the Gap, Banana Republic and its lesser known brands like Athleta, Intermix and Hill City.

Like many mall-based clothing chains, Gap is struggling to turn itself around as shoppers go online or to discounters like T.J. Maxx for their clothing. But Gap, which defined casual dressing in the 1990s, has also long struggled with its own deep-rooted problems — its offerings have failed to stand out from that of its rivals.

Peck had been promising investors that a turnaround is in the making. But instead, the chain has struggled with sales declines, and has had to keep discounting its merchandise to get customers into its stores.

Now, it's turning to new ways to grab customers. In August, its Banana Republic division followed other clothing competitors in launching an online subscription service.

Gap Inc. said Thursday that global sales at its stores opened at least a year fell 4%. By brand, Gap's same-store sales fell 7%, while the figure was down 3% at Banana Republic. At Old Navy, which had been the company's juggernaut, same-store sales fell 4%.