NEW YORK — The search is over. Now the work begins.
Ending a four-month search marked by rampant speculation, Gap Inc. Thursday named Paul Pressler president and chief executive officer. He takes control of the $13.85 billion chain immediately and brings with him 15 years at the Walt Disney Co., where he was most recently chairman of its global theme park and resorts division.
Pressler fills the considerable shoes of Millard "Mickey" Drexler, who has been credited for spurring Gap’s dramatic growth and Continued from page one
redefining specialty retailing but who was unable to reverse the trend of sagging sales and profits. In May, Drexler, who joined Gap from Ann Taylor Stores in 1983, said he would retire once a replacement was found.
Investors were pleased with the choice and traded up shares of the firm 46 cents, or 3.8 percent, to close at $12.45 Thursday on the New York Stock Exchange.
"Needless to say, the opportunity to lead a company as prestigious as the Gap is very exciting and, in a lot of ways, I think it’s analogous with Disney," Pressler said in a telephone interview. "They’re world-renowned brands; millions of people interact with the brands everyday."
Trading in his Mickey Mouse ears for a pair of basic blue jeans, the newly minted ceo said he will spend the next 60 to 90 days immersing himself in the business, cutting his teeth at the firm just as it gears up for the holiday season.
Pressler was relatively mum on his plans for the company. He did indicate he would bring to Gap "the same kind of sensibility we brought to our theme parks, which is really listening to the customer." He also noted that international expansion, considered one of Pressler’s strengths at Disney, was clearly an opportunity for the firm.
"My role is going to be to set the strategic position," said Pressler, "a lot of planning and a lot of consumer insights. I’m going to go out and work a store for sure; there’s no better way to handle the business."
Drexler, who was traveling and could not be reached for comment, said through a spokesman: "Gap has exceptionally talented and creative people and together we’ve built three incredible brands over the years. As I retire from the company, I’m a major shareholder with an ongoing interest in the success of Gap, Old Navy and Banana Republic. I’ll be available to help with any transition and I wish Paul well in his new role."In addition to the daunting challenge of turning around the largest apparel specialty chain in the U.S., Pressler will receive base compensation of $1.5 million annually and an initial bonus of $885,000, according to a filing with the Securities and Exchange Commission. Next year, he could receive incentive compensation, payable in April 2004, of at least $1.88 million. He will receive options to purchase up to 5 million shares of Gap stock.
By comparison, Drexler earned $2.2 million in salary last year and took no bonus.
The search for Drexler’s replacement was conducted by Herbert Mines Associates and Heidrick and Struggles.
When asked what Pressler brings to Gap, Donald Fisher, Gap’s chairman and founder, said in an interview: "Everything we lack. He brings tremendous confidence in being able to run a multidivisional company. He has tremendous people skills, tremendous customer focus. He’s been managing world-class brands and that’s what we are."
Pressler, though, won’t be involved in the nitty-gritty business of selecting apparel, said Fisher. "We’d like our divisions to run their own businesses as it relates to the design and selection of apparel."
Commenting on why the firm ventured off of the traditional retail and apparel avenues for its new captain, Fisher declared: "We don’t want people with more traditional experience. We invented our business and a lot of people have copied us and now we’re going to go to the next stage. We’re going to try to focus on being more efficient in the running of our business, raising our comp-store sales," said Fisher, who will propose that Pressler be added to Gap’s board.
Perhaps 28 consecutive months of comparable-store declines underlined the need for a change. Gap was seen as having lost touch with the customer bases of its Gap, Old Navy and Banana Republic divisions, insensitive to the public’s expectations of each and unable to reach out through marketing and advertising as it once had. Even as signs emerged of improvement in its merchandise and marketing, it continued to be marred by its sheer enormity — 3,142 locations, many with more than one of its three nameplates.In the eyes of many, the expansion that allowed it to grow to more than $10 billion appeared to have become an albatross.
With Drexler functioning as a lame-duck ceo since he announced his retirement, analysts agreed any progress toward the selection of a successor would be considered good news.
"The Street is thrilled to have the position filled so Gap can start to work on a strategic direction," said Elizabeth Pierce, an analyst with Wedbush Morgan Securities, who wasn’t surprised by the out-of-industry choice. "As more time passed, I suspected they were leaning toward a leader with strong brand management experience. Obviously, Disney is a great brand and he’s been instrumental in moving that along."
Emme Kozloff, an analyst with Bernstein, who worked under Pressler at Disney’s retail group and described him as "a first-class guy," noted, "For me, being a bear on Gap, this is one of the first really positive signs — the ship finally has a rudder. If anyone, he has the tool kit. Right now, they need someone with a full tool kit."
Stressing how varied, difficult and merchandise-intensive running a theme park is, she noted: "Just trying to run the operations in the Gap stores is a walk in the park compared with the complexity of a theme park. I’m actually surprised that he left the Mouse because he was one of the heir-apparents at Disney."
Todd Slater, a retail analyst with Lazard Frères, said: "It’s going to be a very positive hire on a number of different fronts, but first and foremost, we’re getting closure earlier than we anticipated. This, in our view, is an outsider with an insider background — the best of both worlds. He knows products, he knows stores, he knows global brand management."
Retail consultant Emanuel Weintraub said: "It’s easy to say, ‘What does this guy know about what women want?’ Or jeans or polo shirts? But when you have a multimillion dollar operation, the ceo has to bring three elements to the job: vision, leadership and ability to execute. Those are the three components, models of what makes businesses go. Gap can execute, so you come down to how does this man fit?" Weintraub said it would take 12 to 18 months to see "if he’s moving in the right direction."Pressler, 46, has an extensive background that originally started in the toy industry in 1982, when he joined Kenner-Parker Toys, then a subsidiary of General Mills. As vice president of marketing, Pressler oversaw the explosion of the Care Bears craze in 1987. In addition to leveraging the licensing opportunities afforded by that fad, he also served as executive producer of the Care Bears movie, an effort that put him on the radar of Disney ceo Michael Eisner.
Joining Disney in 1987 as senior vice president, product licensing, Pressler worked his way up to become executive vice president and general manager of The Disney Store in 1991. Under his three-year stewardship, Disney Stores grew to 335 units in eight countries from 160.
By 1994, Pressler was ceo of Disney Stores when he was tapped to become president of Disneyland. In that office, Pressler was the head of an empire within an empire, overseeing growth, brand development and operations of Disney’s 11 international theme parks and resorts. With revenues of more than $6 billion, the division also includes more than 22 hotels and two cruise ships.
Lauded by Wall Street for his handling of the division after a precipitous decline in business following the Sept. 11 attacks, Pressler has come under fire recently for the division’s continued sluggish pace, and for the soft openings of California Adventure in 2001, and Disney Quest earlier this year.
That has led some observers to speculate that Pressler — who was short-listed to lead AOL-TimeWarner’s AOL division in July and rumored to be a possible successor to Eisner himself — was pushed out of Disney.
"Some people wonder if he’s being kicked out of the parks, but I don’t think so," said David Joyce, an analyst with Guzman & Company. "I think he has a pretty solid reputation."
Whether Pressler was pushed out or not, many Disney analysts view Disney’s loss as Gap’s gain. Known as a nice guy but a hard-nosed manager, and an excellent cost-cutter who focuses on shareholder value and the bottom line, Pressler’s extensive background in licensing, merchandising and marketing makes his appointment seem less out of left field than it might at first blush."I consider him to be a strong executive," said Katherine Styponias, an analyst with Prudential Securities Inc. "The parks are one of the better-run businesses at Disney. I guess if you look at the surface of it, it might seem odd to move from Disney to the Gap, but Disney is a strong brand and so is the Gap. Disney is an empire that spans the globe and to some extent, so is the Gap. So I think there is a lot in his Disney experience that will translate well to the Gap."
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