By  on November 14, 2005

NEW YORK — Gap Inc. is under financial pressure, leading to speculation that a quiet search has begun for a new chief executive officer to turn it around.

While the corporation has been aggressively recruiting talent, two industry sources said Gap founder, chairman emeritus and largest shareholder Don Fisher is searching on his own for someone to potentially replace Paul Pressler, president and ceo.

"It's a complete rumor," stated a Gap spokeswoman on Friday, responding to the speculation. Pressler and Fisher could not be reached.

But the sources within the fashion and retail industries told WWD that Fisher is quietly placing calls to executives, and no headhunting firm has been hired to conduct an official search. One of the sources called it "a secret search."

The other source said, "It's over. Pressler is going to be replaced and he knows it. Fisher is contacting people on his own."

"They are trying to recruit a lot of senior people, and called three people who [previously] worked for them," said a third source from within the fashion industry. "There are rumors of workforce reviews. It seems like Gap is being run like a bank. People are worried about layoffs. They are trying to get back to the old Gap ways."

That includes trying to recruit additional merchant talent and revive Gap's reputation for high quality, casual and comfortable American style. Only last Thursday, Pamela B. Wallack was named executive vice president, GapKids, babyGap and Gap Maternity, a new position, reporting to Gap brand president Cynthia Harriss. Wallack, who joins Gap on Dec. 12, was senior vice president and general merchandise manager of the juvenile and apparel divisions of Babies 'R' Us and Toys 'R' Us. She was involved in product development, merchandising, planning and allocation, and sourcing, and once had similar roles at Coach, The Disney Store, Country Road Australia and Laura Ashley. 

Last month, Charlotte Neuville was named executive vice president of design and product development for the Gap brand, overseeing all aspects of product design and development for men's and women's, replacing Pina Ferlisi. Neuville previously worked for New York & Co. Inc. and is a 20-year design veteran.The 49-year-old Pressler has been under pressure to turn around Gap's slipping business and stock price and has recently been criticized by Wall Street analysts. He succeeded Millard "Mickey" Drexler in fall 2002 as ceo, and signed a five-year contract. It's conceivable Gap could buy Pressler out of his contract before the term runs out, though if Pressler left the company, it would not be very soon considering the preliminary nature of the reported unofficial search.

Gap's shares closed at $18.45 Friday on the New York Stock Exchange and have ranged from $15.90 to $23.75 in the last 52 weeks.

Last month, two Wall Street research reports took a dim view of Pressler's leadership skills. Jennifer Black & Associates said Gap "may be on the cusp of a leadership change" and "we are beginning to question the leadership's ability to run a vertically integrated retailer. Currently, Gap's team seems to be lacking the magic of a strong merchant."

Robert Buchanan, of A.G. Edwards & Sons Inc., said he was not satisfied with Gap's management and would like to see a senior product person work alongside Pressler, rather than having heads of the company's three brands — Gap, Banana Republic and Old Navy — "hiring their own product heads and pretty much attacking the increasingly tough competitive set on their own." He also questioned whether Pressler was the right person to run Gap.

Gap's numbers have been weak recently, with same-store sales down 5 percent in October, 6 percent in September and 9 percent in August.

However, SG Cowen & Co. analyst Lauren Levitan indicated that it's prudent to be patient on Gap's turnaround and that concerns over Pressler's merchandise expertise "are overstated."

Pressler's career began in the toy industry in 1982, when he joined Kenner-Parker Toys Inc. as vice president of marketing and oversaw the explosion of the Care Bears craze. He joined Disney in 1987 as senior vice president, product licensing, rose to executive vice president and general manager of The Disney Store in 1991, which he expanded, and eventually became president of Disneyland, overseeing the Disney theme parks and resorts.

He's considered an excellent cost-cutter, but with good people skills, a marketer, and is big on research and technology investment, which, with some traffic and sales increases, would really pay off, though he's not a merchant.It is believed that Fisher may now be reaching out to some of the industry's best specialty store merchants, including Roger Markfield, vice chairman of American Eagle Outfitters, who worked for Fisher from 1976 to 1979 as senior vice president of merchandising and marketing for Gap Stores. Fisher and Markfield have remained close. "Don is reaching out. He schmoozed Markfield," said one source.

If Markfield were to join Gap, it's most likely he would run a division rather than the entire corporation, according to retail sources.

Other people whom Fisher could reach out to include Jeanne Jackson, a former Banana Republic president; Grace Nichols, president and ceo of Victoria's Secret Stores; Marie Holman-Rao head of Design Services at Limited Brands Inc., who could also fill a top product job; Scott Edmonds, the president and ceo of Chico's Inc.; Kay Krill, ceo of Ann Taylor Stores Corp.; Mindy Grossman, who oversees the apparel operations at Nike Inc., and Louis Padilla, former top merchant at Sears and Target, who could fill a major Gap position but is generally not considered a ceo type.

Among the inside candidates, Jenny Ming, president of Old Navy, has a solid reputation.

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