Gap Inc. has just put in a tall order — finding a chief executive officer for the struggling group.
And observers say those most qualified for the job to replace Paul Pressler — apparel merchants with vision and turnaround skills — are either generously compensated and content with their current employers, impeded by non-compete clauses, of or near retirement age or just not willing to take on the monumental task of reviving the $16 billion Gap Inc. and its Gap and Old Navy brands.
“There’s only a handful of people who potentially could affect meaningful change at the Gap,” said Robert Buchanan, a retail analyst at A.G. Edwards. “A lot of damage has been done to the franchise. Most of the people who could help them are already tied up and very happy with current positions.”
“This is a multibrand, multibillion-dollar public company beholden to Wall Street,” said Elaine Hughes of E.A. Hughes & Co. executive search. “Things are very complex. I don’t think there is any one person that can fit the bill. It’s difficult to find one person with operations, financial and merchant skills. The best strategy for the board at Gap to consider is one where the helm of the company is a combination of two executives with complementary skill sets. Ultimately, one person is the ceo but the second in command is considered more of a partner than a subordinate.”
“Gap needs someone who can put their hands on the wheel and create progress quickly,” said Arnold Aronson, managing director of retail strategies, Kurt Salmon Associates. “Some of the speculation centers on industry veterans that have the turnaround experience and qualifications to take the assignment on a shorter-term basis to get the ball rolling and, in the process, attract capable succession management. Allen Questrom accomplished this in under five years at Penney’s. But a turnaround is something you can’t put a hard and fast time limit on.”
Karen Harvey, president of Karen Harvey consulting group, added, “What’s really important is product and very clearly connecting with the DNA of the original culture of the Gap organization, and that was all about driving creativity and making product the most important objective. Each brand must speak directly to their consumers because each brand is in a very crowded market. The next leader needs to be someone who is ultimately a top merchant and who is really an ambassador of design.”
Robert Kerson of Kerson Partners executive search, believes Gap’s ceo hunt is complicated by other retailers seeking top talent now, as well. Express and Ann Taylor Loft are searching for presidents, while Pacific Sunwear and Pier One are seeking ceo’s. It’s not unusual for retailers to clean house in January after evaluating the last year’s performance, but Kerson said the practice “puts them all in bind for talent. You have to wonder, is there enough talent to fill of all these jobs.”
Unfortunately, among those most successful running multibrand specialty retailers are those running companies they built, such as Limited Brands’ Leslie Wexner and Abercrombie & Fitch’s Michael Jeffries, who are not about to leave their babies. Both men also are in their 60s. Meanwhile, many said the man Gap needs is the one the board pushed: Millard “Mickey” Drexler, now chairman and ceo of J. Crew Group, one of the stars of specialty retailing. It’s a long shot he would give up Crew to head back to San Francisco, given his 12 percent stake in the retailer.
“You need somebody with gravitas,” said another principal of a search firm. So thin are the ranks of qualified candidates that this search executive concluded, “Eventually, Gap will have to look outside the industry.”
“The thing that needs to happen before anyone signs up is that the Gap needs to figure out what they’re going to do with the company,” said William Cody, managing director of the Jay H. Baker Retailing Initiative at the University of Pennsylvania. “It will be hard for any ceo candidate to step in without a tremendous golden parachute. It’s a huge risk. My gut feeling is that there is going to be a leveraged buyout. To say that Gap is going to be able to turn itself around in the public eye is really farfetched.”
As for where to look for ceo candidates, “I don’t think the luxury segment is out of the question,” said Gabrielle Kivitz, senior retail analyst at Deutsche Bank. “Domenico De Sole, [former ceo of Gucci], is on their board. They’re going to do a lot of work to make sure they have the right candidate. Right now, the bar for achievement is set very low.”
De Sole is on the board committee conducting the ceo search, which also includes directors Adrian Bellamy, Gap Inc. founder Donald Fisher and former Wal-Mart executive Bob Martin.
Among the executives industry sources believe could be on Gap’s radar are:
- Mackey McDonald, chairman and ceo of VF Corp.: With a strong record at running the multibrand VF, he’s low-key, good at building retail businesses, knows product but is considered the quintessential operator and understands how to attract strong people to work for him. However, he’s a VF veteran, intricately tied to the corporate culture and likely to stay loyal.
- Jim O’Donnell, ceo of American Eagle Outfitters: Under O’Donnell, AE has grown to 836 stores; launched Martin + Osa, a chain targeted to 25- to 40-year-old women and men, and introduced aerie, a subbrand of AE. The company has been on a roll and taking market share from Gap.
- Susan McGalla, president and chief merchandising officer, American Eagle: She’s responsible for the design, merchandising and marketing functions at the retailer, and is credited with bolstering AE’s women’s business and devising some creative marketing partnerships such as with the Sundance Film Festival. She’s also currently developing another brand yet to be announced.
- Allen Questrom, former chairman and ceo of Federated Department Stores Inc. and J.C. Penney: Questrom’s the turnaround king and a visionary with a track record for restoring retail operations and ability to attract talent. But he’s retired, recently became a partner in hedge fund Lee Equity Partners and is said to be loving his freedom and perhaps unwilling to tackle another monumental task.
- Vanessa Castagna, former executive chairman of Mervyns and chairman and ceo of J.C. Penney stores, catalogue and Internet: She knows product and sourcing, helped revive Penney’s, works hard and can easily run a Gap division, given her experience. However, she just left Mervyns and its principal owner, Cerberus Capital Management, and said she’s tired of the daily grind and wants to sit on boards.
- Roger Farah, president and chief operating officer of Polo/Ralph Lauren: Everyone’s favorite candidate every time a major job opens in the industry, Farah is a strong leader. But he’s unlikely to leave Polo considering he’s highly compensated and has a strict non-compete clause.
- Ron Johnson, senior vice president of Apple retailing: He’s got the right stuff to turn around a big ship like the Gap. He’s got vision, is a strategist and has experience as a merchant early on in his career at Target. The Apple retail rollout has been fast, furious and highly creative, but one source noted that Apple still has a relatively small retail fleet. “Ron Johnson is a popular guy because of the experience he’s had at Apple, but Apple does sales of $2,000 a square foot. They’re less product-challenged.”
- Kay Krill, chairman and ceo of AnnTaylor Stores Corp.: She has experience running a multibrand company and catapulted Loft’s growth. But Loft sales for most of last year were off while Ann Taylor improved. She’s well liked, animated and considered a good leader, and her mantra has been brand differentiation.
- Rose Marie Bravo, retired ceo of Burberry: She has a strong reputation as a leader, an eye for creative talent and brand image and loves San Francisco, but is said to be perfectly content in retirement. She’s still on the Burberry board and unlikely to want to tackle another brand overhaul so soon.
- Ken Hicks, president and chief merchandising officer of J.C. Penney: He has strong leadership skills, understands how to hire and manage the right people, strategize and differentiate a retailer and its merchandise.
- Matt Rubel, ceo of Payless: He strengthened Payless, is said to have a thoughtful marketing mind, is financially astute and has the ability to position a business. He doubled the value of Payless stock from $16 to $33, though a source said, “I don’t know that he has the deep vertical experience. Cole Haan [where Rubel was previously] is not near the scale and Payless is a thoroughly different market.”
- Paul Charron, former chairman and ceo of Liz Claiborne: He diversified the business and developed a portfolio of brands so the company would be less dependent on the Liz Claiborne brand. Juicy Couture has been a blockbuster, though Charron is more a wholesaler than a retailer, and recently just built a house on Martha’s Vineyard.
- Mindy Grossman, ceo of retailing at Barry Diller’s IAC/InterActiveCorp.: Grossman stunned the industry when she stepped down as Nike’s global vice president of apparel to join Diller’s venture. She runs a business with sales last year of more than $3 billion. As Nike’s highest-ranking female, she aggressively built the apparel business, and seems to have a lower profile since joining IAC.
l Glen Senk, president of Anthropologie and executive vice president of its parent company, Urban Outfitters: Senk oversees 89 Anthropologie stores, Urban’s Free People division and has been involved in developing a new concept. He’s known for his sensitivity to product and for promoting a culture that values camaraderie at the home office. Reportedly, he has been eyed in the past by Gap, most likely for a division. He’s never been the top gun at a corporation.
Some sources also mentioned Dorrit Bern, chairman and ceo at Charming Shoppes and a former Sears merchant; Jim Scarborough at Stage Stores, who turned the business around, delivered value to shareholders and is considered a dynamic leader, but not a vertical retailer, and Scott Edmonds, who runs Chico’s and oversees multiple chains there. If Gap falls short in the U.S., the search could go overseas to seek potential candidates, such as Stuart Rose, ceo of Marks & Spencer, and Jane Shepherdson, former brand director of Topshop.