Gap posts big loss; executive shakeup includes exit of Athleta CEO
Gap Inc. widened its fourth-quarter loss, announced several executive leadership changes and said it is close to hiring a new CEO.
The struggling apparel retailer said that Mary Beth Laughton, president and CEO of Athleta, is exiting the business, effective March 9. Prior to taking the top spot at Athleta in 2019, she was executive VP of omni retail for Sephora U.S. The search for Laughton’s replacement is underway.
“We believe Athleta has incredible potential, but it has suffered from product acceptance challenges over the past several quarters,” said executive chairman Bob Martin who was named interim CEO in July following the abrupt departure of Sonia Syngal. “As we look to capitalize on this potential and remain competitive amidst a dynamic landscape, we believe now is the right time to bring in a new leader who can position Athleta for long-term success.”
The company also announced that Sheila Peters, chief people officer, will leave the company at the end of the year.
“As a critical part of our transformation, Sheila will continue in her role enabling our people and culture through experiences and practices needed to fuel our business, while helping to identify and transition her succession,” Martin said.
In other changes, Gap eliminated the role of chief growth officer, which was held by Asheesh Saksena, effective March 9.
In its earnings release, Gap said it would be “decreasing management layers to improve quality and speed of decision making” and taking other actions to simplify operations. It estimates the moves would result in $300 million in annualized savings, with roughly half expected to be realized in the back half of fiscal 2023. The moves “will incur severance and other related costs,” the company said.
Gap reported a net loss of $273 million, or a loss of $0.75 per share, in the quarter ended. compared to a loss of $16 million, or $0.04 per share, in the year-ago period. Analysts had expected an adjusted loss of $0.46 per share.
Revenue fell 6% to $4.24 billion, missing analysts’ estimates of $4.36 billion. Comparable sales fell 5%. Online sales decreased 10% compared to last year and represented 41% of total net sales.
By brand, Gap’s North American comp sales fell 5% Comp sales fell 3% at Banana Republic and were down 1% at Athleta.
For the full year, Gap’s had total sales $15.6 billion, down 6% compared to last year. It had a net loss of $202 million, compared to a net loss of $256 million in 2021. On a positive note, the retailer reported that inventory declined 21% from the year-ago period.
Gap’s struggles in 2022 were exacerbated by the termination of its collaboration with the controversial rapper and fashion designer Kanye West ( “Ye” ) after he made a series of anti-Semitic remarks. In its third quarter, Gap booked a $53 million impairment related to the end of the contract and leftover products. In its fourth-quarter earnings release, Gap said the shutdown of Yeezy Gap hit growth in North America by around 2 percentage points.)
“To enter fiscal 2023 in a more competitive position, we took quick and effective action to clear excess inventory, improve assortment balance, particularly at Old Navy, and to meaningfully optimize our cost structure, resulting in $550 million in annualized savings identified to date,” stated Martin. “The board is getting close to choosing the next CEO for Gap Inc. As a result of the work we have underway to build a stronger foundation and restore the company’s creative muscle, we are optimistic that this will provide our new leader with a quicker ramp in driving consistent, profitable growth over the long term."
For fiscal 2023, Gap anticipates net sales could decrease in the low- to mid- single-digit range compared to last year’s net sales of $15.6 billion. Fiscal 2023 will include a 53rd week estimated to positively impact net sales by $150 million.