Gap (GPS) shares lost more than 7.6% to $16.68 on Friday after surprise announcement of departure of its CEO Art Peck and a sharply lower sales revision and profit forecasts for the clothing distributor for the 3rd fiscal quarter and for the full year 2019-2020.
For a number of years now, the ready-to-wear brand has been facing erosion of its sales, in the face of competition from online businesses and highly responsive brands such as H & M, Uniqlo and Zara, against which the American group has not yet found an effective strategy. The Gap share has now dropped 35% since the beginning of the year, despite the announcement in March of a project to split its cheap brand Old Navy.
Art Peck, who had headed Gap since 2015, is also leaving the board of directors. He will be replaced by Robert J. Fisher, non-executive chairman and founding family member of the San Francisco-based group.
At the same time as this change of direction, the group announced Thursday evening after earnings are revised sharply lower. For its third fiscal quarter ended November 2, the group now expects an adjusted earnings per share ranging from 34 to 36 cents, where analysts were still waiting 55 cents.
Same-store sales declined 4% in the third quarter, as the market expected a less pronounced decline of 2.2%. Gap brand sales declined 7%, Banana Republic sales declined 3%, and Old Navy sales declined 4%.
For the full year, Gap anticipates adjusted earnings of $1.70 to $1.75 per share, compared with a previous forecast of $2.05 to $2.15. Analysts expected their side on an adjusted EPS of $2.07.
“It has been a difficult quarter,” said Gap’s chief financial officer Teri List-Stoll. “Macro-economic impacts and declining attendance further exacerbated pressure on results that have already been affected by problems in terms of products and execution in key brands, “she said.