Chairman Bob Martin is taking over immediately as CEO on an interim basis, the company announced in a statement. The company’s stock has been battered by operational missteps — including a clumsy implementation of expanded women’s sizes at Old Navy that has caused inventory levels to swell just as demand may have crested. Gap already announced the departure of Old Navy’s top executive earlier this year.
Gap shares sank as much as 4.1% in late trading before paring the decline. The shares are down 50% this year, compared with a 30% drop for the S&P 500 Retailing Index.
Back in early 2020, it was Syngal, now 52, who stepped in to replace a CEO who abruptly departed amid operational problems. Predecessor Art Peck left after a scrapped plan to spin off Old Navy and failing to reignite sales growth. Syngal had been the head of Old Navy, which generates more than half of the company’s revenue.
Syngal’s departure further reduces women’s representation at the top of US public companies. There are currently 33 women leading companies in the S&P 500 Index, according to Bloomberg Data. Gap was removed from the index at the start of the year.
After taking over in March 2020, Syngal immediately had to navigate mandatory store shutdowns and the sudden shifts in demand caused by Covid-19. She oversaw the expedited implementation of curbside pickup and the expansion of e-commerce operations — moves that investors applauded.
She was unable to keep up the momentum, however. The company as a whole appears to be struggling to capitalize on rapid changes in apparel trends as offices reopen and consumers move away from comfortable clothes, such as sportswear, in favor of work attire. Gap’s upscale Banana Republic chain was a standout last quarter, but that wasn’t enough to counter weakness at the other divisions.
Additionally, a deal to produce apparel with Kanye West’s Yeezy brand has failed to generate meaningful results. After announcing the project with fanfare, Gap executives have been mostly quiet on the issue.
The company’s missteps are ill-timed as the retail industry gears up for back-to-school season, one of the biggest shopping times of the year. “As a family brand, this has a compound halo effect. When we aren’t delivering for moms, she’s less likely to come to Old Navy for her kids,” Syngal said during the company’s latest earnings call.
Gap, which also operates Athleta in addition to its namesake brand, expects $50 million of air-freight charges and other costs that will offset operating profit in the fiscal second quarter.
The company sees Old Navy as the key driver behind its plan to reach $10 billion in sales by 2023. Old Navy added more plus-size women’s apparel to expand appeal — but the move backfired when its size assortment was imbalanced, with too many of some sizes in stock and not enough of others. That led to cuts in orders for the third quarter.
Gap expects its operating margin percentage to be zero to slightly negative in the second quarter. The announcement followed a previous reduction in its profit outlook. The retailer expects to get through its glut of inventory with steep discounts, which will weigh on profits.
“Old Navy was going in the wrong direction and that can’t happen because it’s so critical to the overall business,” said Morningstar analyst David Swartz. “It’s clear that some the strategies that Syngal herself was a proponent of had failed, like the extended sizes.”
The apparel retailer also hired Horacio “Haio” Barbeito as the new CEO of Old Navy. Barbeito will join Gap after a 26-year career at Walmart Inc., where he most recently served as CEO of the retail giant’s operations in Canada, its largest foreign market except for Mexico. Before that, he led Walmart’s business in Argentina and Chile.