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California and the West

2 executives leave Gap amid tumbling sales

The exits from top posts at the Gap and Old Navy chains, the firm's most troubled units, extend an exodus of talent.

January 11, 2007|Abigail Goldman | Times Staff Writer

Gap Inc. said Wednesday that two executives at its most troubled divisions, Gap Adult and Old Navy, were leaving the San Francisco clothier.

The nation's largest specialty retailer, which also operates Banana Republic and Forth & Towne, has suffered plummeting sales for more than two years, threatening the tenure of Chief Executive Paul Pressler.

Pressler, a former Walt Disney Co. executive, has led the company for four years.

"It's certainly a step in the right direction," Douglas Christopher, an analyst at Crowell, Weedon & Co. in Los Angeles, said about the Gap executives' departures. "They've been floundering for a while."

The company last week said it would review brand strategies at Gap and Old Navy, the two largest -- and poorest performing -- divisions.

Gap also reportedly has hired investment bank Goldman Sachs Group Inc., which encouraged investors who believe that a sale of the company or spinoff of one or more divisions would boost the company's fortunes.

On Wednesday, the company said it was searching for replacements for Denise Johnston, 47, president of the Gap Adult division, and Ivy Ross, 51, who had served as executive vice president of product design at Old Navy.

In the interim, Gap's North America President Cynthia Harriss and Old Navy President Dawn Robertson will run those divisions.

Gap also said it named Karyn Hillman, who had helped run Banana Republic's apparel merchandising, as senior vice president of merchandising for Gap Adult.

The company's sales in stores open at least a year rose in just two of the last 31 months. Total sales haven't gained in seven consecutive quarters, and profit has fallen in the last five quarters.

However, Christopher, who has a "buy" rating on the stock, called the company a down-and-out value because of its strong cash flow and decreasing debt.

"Now the market is waiting for the retail fix," he said. "It could mean management changes; it could mean a splitting up of the company."

As the company's problems mounted, several other Gap leaders have left.

The well-respected head of Old Navy, Jenny Ming, departed in the fall -- the seventh top executive to leave the company in the last year.

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abigail.goldman@latimes.com

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