When Gap Stores (NYSE: GPS) installed Glenn Murphy as its chairman and CEO, he was hailed as a savvy retailer whose marketing know-how would compensate for his lack of fashion industry experience. In its press release announcing the hiring, Gap declared that:
During his more than 20 years of experience in retail, Mr. Murphy successfully reinvigorated retail brands in the areas of food, health and beauty, and books. Most recently, at Shoppers Drug Mart, he differentiated the brand with new products and better service, and grew the company's market capitalization from about CAD $3 billion to over CAD $10 billion following its public offering . . .
Nearly 11 months into his tenure, the reinvigoration hasn't exactly happened: June comparable store sales fell 14% which, even allowing for the tough retail environment, isn't too impressive. But Murphy has made progress on other fronts and, so far, his main accomplishment has been cost-cutting.
Reuters reports that Gap is now looking to fold some of its Baby Gap and Gap Kids stores into its flagships to save on rent costs. Is Murphy giving up on more ambitious plans to breathe new life into Gap and Banana Republic? I doubt it but, in the meantime, the cost cuts are adding shareholder value, even if that hasn't been reflected in the stock price. In a different market environment, this leaner Gap trading at a low price/earnings ratio might be a buyout candidate. It could yet become one.
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