NEW YORK — Playing it safe in reorganizing the top ranks, Gap Inc. on Thursday named two insiders to run divisions, but continues the difficult search for a new chief executive officer to succeed Millard Drexler.
Gary Muto was tapped as president of Gap U.S., while Maureen Chiquet, executive vice president of merchandising for Old Navy, will succeed Muto as president of Banana Republic. Drexler was filling in as president of Gap. The last person to hold the title of Gap president was Ken Pilot, who runs Gap International now.
Muto, 43, and Chiquet, 39, each have more than a dozen years in merchandising and management at the company. Both will report to Drexler, who is retiring from the company later this year. Two search firms, Herbert Mines and Heidrick & Struggles, are working to find Drexler’s successor.
With two experienced retailers running the two divisions, Gap would feel more comfortable selecting a ceo from outside retailing, and has said that it is considering executives from other industries, and different countries. Not everybody thinks that would be a good idea.
“You just can’t have someone that comes in from Procter & Gamble. It would be a disaster,” said Isaac Lagnado, president of Tactical Retail Solutions research and consulting firm. “Even a good British or French retailer would be wrong. It would take them so long just to understand the mechanics of mall positioning in the U.S. The learning curve takes a minimum of a couple of years. You really do need someone highly experienced in trend spotting, manufacturing, rolling out styles, and fabrics.”
Speculation on the next Gap ceo has been all over the place, from Liz Claiborne’s Paul Charron to Ralph Lauren’s Roger Farah, American Eagle Outfitter’s Roger Markfield and Kohl’s Rick Leto.
Commenting on Thursday’s appointments, Lagnado said: “Since a new ceo has not been found, I feel these are interim personnel changes. In the case of the Gap, the imprint has been so much from the person on top.”
“It’s a little curious they didn’t pick an outsider, since Gap is in real need of reinvigorating and reinventing,” said David Diamond, partner at Whitehead Mann executive search. “But it probably means they are fairly serious about looking outside retailing. It helps knowing the number-two executives are retailers.”
Diamond also suggested that Chiquet’s transition would be more difficult than Muto’s, since she’ll have to change her focus from price to concentrating on quality and style. “You don’t often see merchants going from May Co. to a Neiman Marcus or Saks,” he noted. “It’s easier to go from high-end,” to a Gap-type business.
However, “Transferring the individuals from division to division makes a lot of sense,” said Elaine Hughes, principal of E.A. Hughes & Co. executive search. “While the price points may be different and the customers may be different, the business models at Banana Republic and Gap, the systems by which they are run, are essentially the same. It’s all about timely product development, getting the right raw materials, good fit, and good fabric. That’s the core model.
“These appointments also make sense because Gap Inc. will be getting a new chief executive, and to have a few qualified merchants in the inside will make it an [easier] transition.”
Todd Slater, retail analyst at Lazard Frères, agreed, “It is a smart move to strengthen the ranks and fill the position from within so the company and the new ceo has flexibility upon arrival.”
Marcia Aaron, a specialty retail analyst with Pacific Growth Equities, said it would have been hard to hire from outside. “They do not have a chief executive yet and most candidates from the outside would want to know who the new ceo will be and if there will be any changes.”
Still, she questioned whether Muto could divorce himself from Banana Republic. “I am concerned with brand blurring,” she said, adding it would be more palpable if BR were doing well, which it hasn’t over the last two years.
But several analysts have recently cited fall merchandise improvements, and expect comps to be favorable against last’s year dismal figures, particularly with a return to Gap’s historical basic and denim styles.
[For Gap’s July comp-store sales, see story beginning on page one.]
Russell Jones, a retail consultant at Cap Gemini Ernst & Young, is seeking more dramatic news than a couple of new divisional heads.
“Gap has do something about its store count, either closing some or converting some to another concept,” he said, suggesting the Gap division try a trendier concept. Such merchandise never worked inside existing Gap stores.
Drexler, in a statement, said: “Gary and Maureen both have the creative merchandising skills and general management experience that’s essential to leading Gap and Banana Republic. Gary understands Gap, knows how to get the best out of creative teams and has the management focus necessary to deliver great merchandising, marketing and design. Maureen is part of the leadership team that created and built the Old Navy brand. Her broad merchandising skills and experience in growing and managing a multibillion dollar brand will help Banana Republic continue to evolve.”
Muto joined Gap Inc. in 1988, starting in Gap merchandising. He moved to Banana Republic in 1995 and held senior merchandising positions until becoming president there in April 2001. Chiquet joined Gap Inc. in 1988 and worked in Gap merchandising prior to joining Old Navy in 1994, where she held senior merchandising positions. She became executive vice president of merchandising, production and planning in March 2001.
Gap chairman Don Fisher said candidates inside and outside of the company were considered for the Gap U.S. job.