Struggling US clothing retailer Gap Inc has ended a seven-month search for a new CEO by hiring a fashion industry outsider to lead the company's turnaround.

The San Francisco based group on Thursday (26 July) named Glenn Murphy, the former CEO of Canada's largest drug store chain, Shoppers Drug Mart, as its chairman and chief executive officer.

Murphy succeeds Robert J Fisher, the current chairman of the board of directors who has served as interim CEO since the departure of Paul Pressler in January of this year.

Fisher, who will continue to serve on the board, said Murphy "has revitalised major retail brands by offering new products and significantly improving the store experience. He's well qualified to return Gap Inc to the level of sustained performance we all expect."

During his time at Shoppers Drug Mart, Murphy led the company through "an unprecedented period of growth and shareholder returns" during which revenues increased 22 consecutive quarters year-over-year and its earnings per share doubled.

He also has more than 20 years of experience in reinvigorating retail brands in the areas of food, health and beauty, and books garnered in positions at Loblaw Companies Ltd and Chapters.

Murphy, whose package in fiscal 2008 is likely to be around $12m if he meets certain performance targets, has promised to "work to re-establish each brand's leadership position and set the company along a path of sustained earnings performance."

He is expected to join Gap in the next week pending receipt of his US work authorisation.

However, there's no doubt Murphy will have his work cut out to reverse nearly 36 months of sliding same-stores at the largest US-based apparel specialty store group which has 3,100 stores across its Gap, Old Navy and Banana Republic chains.

Despite measures to stem falling sales, including the closure of its Forth & Towne stores after an 18-month launch and efforts to streamline operations so that the organisation can be more nimble and efficient, the company in May reported a 26.4% slump in first quarter earnings to US$178m.

And in June, same-store sales slipped a further 5% in what the company described as a "transitional month" when it cleared summer merchandise.

At the root of the company's problems, according to analysts, is its lack of inspired fashions and the need for a clearer understanding of its customers and the fashion directions that would bring them back and perhaps enlist new ones.

Earlier this year Candace Corlett, partner at WSL Strategic Retail in New York, said the company seemed unable to hit the right fashion note. "They've gone from jeans and white shirts and khaki pants to gold lame, and no one's really sure of what Gap stands for."

More worryingly, the competition is moving ahead and the Gap has been unable to keep up.

In response, however, Gap has recently taken steps to refine its design teams by hiring Patrick Robinson, the Paris-based former artistic director of Paco Rabanne, to oversee the creative direction of its North American apparel, accessories and intimate apparel.

It has also decided to shift its focus from younger consumers and instead target those in their late 20s.

Industry observers, who have long been calling for a permanent CEO and a firm course on strategic direction, had assumed that Gap would recruit someone with apparel industry experience, unlike Pressler who joined the company from Walt Disney Co.

Instead, the hiring of a non-fashion executive to drive change at all three of the $16bn retailer's divisions is likely to divide opinion. While some may argue that only a fashion specialist can appreciate the intricacies of this industry, others believe that core skills are easily transferable. Murphy will also be backed by an experienced apparel team heading up Gap's three divisions.

Gap itself praised Murphy's 20 years of retail experience across three distinct retail sectors, and say he has demonstrated the ability to consistently drive both top and bottom line results.

"When we met Glenn the entire board unanimously agreed that we'd found the right leader for our company," confirmed independent Gap Inc director Adrian Bellamy, chairman of The Body Shop International Plc and Reckitt Benckiser Plc who sat on the search committee.

"His proven retail skills and demonstrated financial results complement the strong brand leaders we have running our core businesses. We are confident he will prove to be a very successful leader of our management team in the years ahead."
By Leonie Barrie.