Gap CEO Syngal Fired After Failing to Rescue Struggling Retailer
(Bloomberg) — Gap Inc. fired Chief Executive Officer Sonia Syngal as the apparel company struggles to overcome operational challenges that have hindered the business.
Chairman Bob Martin is taking over immediately as CEO on an interim basis, the company announced in a statement. Gap has reported operational missteps and swelling inventory levels recently, sparking declines in the stock market. Old Navy, which is responsible for the biggest part of Gap’s revenue, has been particularly affected, and in April announced the departure of that business’s top executive.
Gap shares sank as much as 4.1% in late trading. The shares are down 50% this year, compared with a 30% drop for the S&P 500 Retailing Index.
It’s a move that’s familiar for investors. In 2019, the company fired then-CEO Art Peck following operational problems. At the time, Gap’s chairman also came on to oversee the hiring process, which culminated in the promotion of Syngal, now 52, from head of Old Navy in March 2020.
Syngal, who was part of a small group of female CEOs at US public companies, immediately had to navigate mandatory store shutdowns and the sudden shifts in demand caused by Covid. She oversaw the rapid implementation of curbside pickup and the expansion of e-commerce operations — moves that investors applauded.
She was unable to keep up the momentum, however. Gap, which operates Old Navy, Athleta and Banana Republic in addition to its namesake brand, expects $50 million of air-freight charges and other costs that will wipe out operating profit in the fiscal second quarter.
The company sees Old Navy as the key driver behind its plan to reach $10 billion in sales by 2023. Old Navy added more plus-size women’s apparel to expand appeal — but the move backfired when its size assortment was imbalanced, with too many of some sizes in stock and not enough of others. That led to cuts in orders for the third quarter.
Gap expects its operating margin percentage to be zero to slightly negative in the second quarter. The announcement followed a previous reduction in its profit outlook. The retailer expects to get through its glut of inventory with steep discounts, which will weigh on profits.
“Old Navy was going in the wrong direction and that can’t happen because it’s so critical to the overall business,” said Morningstar analyst David Swartz. “It’s clear that some the strategies that Syngal herself was a proponent of had failed, like the extended sizes.”
The apparel retailer also hired Horacio “Haio” Barbeito as the new CEO of Old Navy. Barbeito will join Gap after a 26-year career at Walmart Inc., where he most recently served as CEO of the retail giant’s operations in Canada, its largest foreign market except for Mexico. Before that, he led Walmart’s business in Argentina and Chile.
(Corrects age of CEO in fourth paragraph.)