Gap is shaking up its leadership following a weak Q4 2022 with the immediate departure of President and CEO of Athleta Mary Beth Laughton; the elimination of the role of Chief Growth Officer (CGO), currently held by Asheesh Saksena, also effective immediately; and the departure of Chief People Officer Sheila Peters, who will leave at the end of 2023. The retailer also is taking action to simplify and optimize its operating structure, which includes ending the CGO role.
Gap Interim CEO and Executive Chairman Bob Martin will work closely with the Athleta team to guide them through the transition until a new leader is found. “We believe Athleta has incredible potential, but it has suffered from product acceptance challenges over the past several quarters,” he said in a statement. “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. I want to thank Mary Beth for her leadership and commitment to igniting the limitless potential of women and girls.”
Additionally, Peters will help Gap identify a successor for her role during her remaining time with the company. She also will continue to help the retailer manage its workforce and culture as it works on refining its operating model.
To improve the quality and speed of its decision-making, Gap is taking actions that include increasing spans of control and decreasing management layers as well as creating a consistent organizational structure across all four of the retailer’s brands. Gap expects to gain $300 million in annualized savings from these efforts once they are fully implemented and will realize $150 million during the latter half of fiscal 2023. However, the actions will first incur severance and other related costs.
Gap has now identified a total of $550 million in potential savings annually, and the company believes there are still more opportunities to optimize its marketing spend and technology investments in the coming years. These could help the retailer stabilize as it fights against continued sales declines — overall net sales for Q4 2022, which ended Jan. 28, 2023, were $4.2 billion, down 6% year-over-year. Results from specific banners include:
- Old Navy: Net sales of $2.2 billion were down 6% year-over-year, with comparable sales down 7%;
- Gap: Net sales of $1.1 billion were down 9% year-over-year, with comparable sales down 4%. The banner suffered from the shutdown of Yeezy Gap, which led to a two percentage point sales growth drop in North America — similar to the hit Adidas took after severing its ties with the controversial artist;
- Banana Republic: Net sales of $578 million were down 6% year-over-year, with comparable sales down 3%; and
- Athleta: Net sales of $436 million were down 1% year-over-year, with comparable sales down 5%.
Gap’s results for fiscal 2022 as a whole also disappointed. Net sales of $15.6 billion were down 6% compared to fiscal 2021, while comparable sales were down 7% year-over-year. Merchandise margin declined 500 basis points year-over-year, due to higher discounting and inflationary commodity price increases that were only partially offset by lower air freight expense. However, the margin hit enabled Gap to end the year with $2.4 billion in inventory, down 21% year-over-year.
“We moved swiftly in fiscal 2022 to manage the levers in our control and took action to drive immediate and long-term improvements in our business during what proved to be a challenging year,” said Katrina O’Connell, EVP and CFO at Gap in a statement. “While we are better positioned as we enter fiscal 2023, we continue to take a prudent approach to planning and managing our business in light of the continued uncertain consumer and macro environment. We are confident that our continued actions to further optimize our operating model and cost structure are key steps toward positioning Gap back on its path towards sustainable, profitable growth and delivering value for our shareholders over the long term.”