A big decline in monthly same-store sales reported yesterday by The Gap, Inc. has analysts speculating that the troubled retail giant is in for a management-shakeup or potential breakup.
The Gap, which runs its namesake division as well as the Old Navy and Banana Republic chains, said yesterday that company-wide sales at stores open at least a year fell 9 percent in December, well below analyst estimates of a 3.8 percent drop. Gap’s CEO is Paul Pressler, its founder and chairman is Donald Fisher.
The results were especially disappointing, given that the company was up against an easy comparison of a 1 percent drop in the year-earlier period.
Gap’s sagging sales were “the worst” of major apparel retailers, according to Thomson Financial, and helped drag down the sector’s overall performance.
To put that assessment in context, consider that Gap’s monthly sales declined more than those of Wilson’s Leather, a retailer that narrowly avoided bankruptcy two years ago and has struggled ever since.
Gap blamed fewer customers at its stores for the reduced sales, though it said smaller markdowns should allow it to meet its annual earnings guidelines of $1.12 to $1.17 a share.
Analysts blamed the abysmal performance on boring clothes that failed to entice consumers and the absence of a major advertising campaign during the holiday season.
“Gap and Old Navy’s merchandise is still stuck in a time warp, back in last year’s bright color theme,” wrote Jennifer Black, a retail analyst, in a report yesterday.
Black said she doesn’t expect material changes in the company’s merchandise any time soon.
As a result, she wrote, “the company may be about to have a shake-up, including additional key team member departures as well as top leadership changes.”
Black’s view was echoed by several other analysts and industry executives, who spoke privately.
Black added that the Gap also could be a buyout candidate with the company broken up and sold piecemeal or in its entirety.