Gap Under Fire

According to a report in this morning’s New York Times, the directors of Gap Inc. (San Francisco) are participating in a broad review of the company’s strategy, intensifying pressure on ceo Paul Pressler to pull it out of a protracted sales slump.

Gap said yesterday that sales fell 8 percent in December. It was the third poor holiday season in a row for the specialty apparel retailer.

Same-store sales were down 8 percent. They were down 9 percent at Gap North America and down 10 percent at Old Navy. They were also down 8 percent internationally. Only the Banana Republic division (+2 percent) saw a holiday gain over last year.

“We are clearly disappointed,” Pressler said in a statement.

According to The Times, “The board’s decision to intervene in a review of Gap’s brand strategies suggests that the directors are fed up with the chain’s poor results and the executives who have failed, season after season, to turn it around.”

Pressler said he and the board would review brand strategies at Gap and Old Navy and that he was “committed to making the necessary changes to improve performance.”

In the meantime, the prospects are iffy.

“Although Banana Republic continued to make good progress in its turnaround, we continued to experience negative traffic trends at Gap and Old Navy,” said Sabrina Simmons, senior vp, corporate finance. “Given the weak traffic trends, we needed to take significant action on promotions and markdowns at these two brands which drove Gap Inc.'s overall merchandise margins significantly below last year. We expect continued margin pressure into January as we work to clear remaining holiday product at Gap and Old Navy.”