Gap resurgence lies in Canadian retail vet

SAN FRANSISCO —Gap Inc. has tapped another industry outsider to try and turn the company around. After a six-month search, the apparel retailer named Glenn Murphy, a Canadian retail veteran, as its new ceo.

While Murphy has more than 20 years of retail experience, he does not have any experience in the specialty apparel industry. Most recently, Murphy served for six years as the chairman and ceo of Shoppers Drug Mart, the largest drug store chain in Canada. Before that, he held several positions at Loblaw Cos., a leading Canadian retail and wholesale food company, and he also served as president and ceo of Chapters, a major book retailer in Canada.

“Murphy is no merchant,” warned Todd Slater, a senior retail analyst with Lazard Capital Markets, in a report. “With no merchandising background, the new ceo is clearly a departure from the board’s stated goal of installing a leader with ‘deep…merchandising experience ideally in apparel.’ Instead, Murphy’s hire moves Gap Inc. from the Disney [era] to the drug era, and could be the latest in a series of fashion missteps.”

Murphy succeeds Robert Fisher, a member of the founding family, who acted as interim ceo since January when Paul Pressler resigned. Pressler, who also lacked an apparel background, ran the Disney Stores chain when he was an executive at Walt Disney. While Pressler did not ultimately revive Gap’s comparable-store sales, or hire talent that helped improve the company’s product, he did initially cut the company’s expenses and restored its overall balance sheet.

While Murphy does not have apparel retailing experience, he is not without his merits. With Murphy at Shoppers’ helm from 2001 to 2007, for example, the company reported 22 consecutive quarters of revenue growth, earnings doubled and the stocks appreciated 180% (roughly 25% per year, on average). According to Fisher and Gap executives, Murphy not only has a history of strong returns for investors, he also has a good track record for turning companies around.

“Glenn is known for being a decisive leader with great retail instincts who understands his customers,” Fisher said. “He has revitalized major retail brands by offering new products and significantly improving the store experience. He’s well qualified to return Gap Inc. to the level of sustained performance we all expect.”

Murphy will have a daunting task in front of him, apparel experts say. Sales and net income for Gap Inc. have declined over the last two years. The company has experienced several months of same-store sales declines over the past couple of years as well, sometimes across all three of its brands and sometimes consecutively for months at a time. Many analysts are calling for hundreds of store closures so that the company can again reclaim its cachet with loyal shoppers. Other drastic moves may be needed, as well.

“For the short term, Gap [brand] should eliminate peripheral categories such as intimates, pet and shoes, and get laser focused on apparel and accessories,” said Carol Spieckerman, president of newmarketbuilders, a retail strategy firm. “In terms of positioning, Gap cannot go back to being all about khakis and T-shirts. With Wal-Mart, Target, Uniqlo, American Apparel and others, including Gap’s own Old Navy, on one end, and Abercrombie, American Eagle and so on, on the other, Gap’s search for a niche will be more difficult than ever.”

Although much work remains to be done under Murphy, Gap Inc. has already made some moves to clean up the clutter and turn the business around. Gap has cut jobs in recent months in order to streamline management, and it has begun to hire new design talent such as Patrick Robinson as the new head of Gap Adult. Gap Inc. also cut its Forth & Towne business, which catered to female baby boomers, at the end of June, after an 18-month, 19-store pilot.